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Fortnightly Magazine - February 15 1995

Deregulation Brings Moody's Down

Lori A. Burkhart

Citing credit uncertainties stemming from impending deregulation, Moody's Investors Service has posted negative ratings outlooks for the U.S. electric, telecommunications, and natural gas industries (with the exception of the pipeline segment). Moody's acknowledges, however, that the impact of deregulation will depend on market maturity, relative cost structure, degree of integration, and regulatory flexibility.

Calif. Utilities Win Higher ROE

Phillip S. Cross

The California Public Utilities Commission (CPUC) has approved increases in the rate of return on equity (ROE) for the state's largest energy utilities, citing increasing interest rates and perceptions of risks in the electric industry. The CPUC approved increases of 70 to 120 basis points above the 1994 baseline ROE figure of 11 percent.

It explained that since utilities' ROEs were reduced as interest rates dropped, they should increase with the general cost of capital.

DRI/VP Still Under Fire

Lori A. Burkhart

The interim consultant's report on the Dominion Resources/Virginia Power (DRI/VP) merger identifies problems with the holding company structure.

DRI/VP claim that the report's corporate structure recommendations conflict substantially with their settlement agreement, and appear to impose unique and extraordinary constraints on corporate governance.

Pennsylvania Regulators Disagree on ROE Award

Phillip S. Cross

A recent rate order by the Pennsylvania Public Utilities Commission (PUC) granting West Penn Power Co. a $53.7-million increase has generated some disagreement between the state's utility commissioners on the issue of rate of return on equity (ROE). Although the PUC reduced the utility's proposed ROE from 12.5 to 11.5 percent, PUC chairman David W. Rolka and vice chairman Joseph Rhodes, Jr. both claimed the ROE was too high.

Ariz. Telcos Lose Monopoly Hold

Lori A. Burkhart

The Arizona Corporation Commission has opened local telephone service to competition. The transition from monopoly service to a structure of managed competition is expected to take six months. The rules allow cable television companies, fiber-optic network owners, and other utilities to seek authority to provide business and residential dial tone in competition with the present local exchange monopoly provider.

Court Remands Mass. Ruling on Externalities

Phillip S. Cross

The Massachusetts Supreme Court has vacated and remanded a Massachusetts Department of Public Utilities (DPU) decision on environmental externalities, agreeing with Massachusetts Electric Co. that the DPU had no authority to require electric utilities to select new power sources based on externality values that encompass costs ratepayers otherwise would not incur.

UtiliCorp Throws Down the Gauntlet

Lori A. Burkhart

UtiliCorp United has announced a growth-oriented strategy that will introduce free-market concepts such as supplier choice and low-cost pricing to customers across the United States.

According to UtiliCorp chairman, president, and CEO Richard C. Green, Jr., the utility plans to use future mergers and partnerships to bring competitively priced energy products and services to consumers nationwide.

California Prods Local Telephone Competition

Phillip S. Cross

The California Public Utilities Commission (CPUC) plans to issue interim rules in June 1995 allowing competitors to seek authority to offer local telephone service in the state. (The CPUC also recently completed a plan to open the "local toll" market to competition.) The CPUC directed all interested parties to seek a settlement of the issues arising under its plan to move the local market to full competition by 1997.

Southwest Intertie Gets the Go-ahead

Lori A. Burkhart

Idaho Power Co. (IP) has received approval from the Bureau of Land Management to proceed with its proposed 500-mile, 500,000-volt transmission line between Idaho and Nevada (em the largest transmission project presently under development in the United States. The Bureau based its decision on the environmental impact statement for the Southwest Intertie Project (SIP), and has granted IP a right-of-way across public lands in Idaho, Nevada, and Utah. The line will link 14 utilities in the Southwest and California. IP plans to retain 20 percent of the line's 1,200-megawatt capacity.

AT&T and Others to Provide Local Service in New York

Phillip S. Cross

The New York Public Service Commission (PSC) has approved comprehensive rate and service tariffs enabling AT&T Communications of New York, Inc. (AT&T) and Frontier Communications of Rochester, Inc. (Frontier) to provide local telephone services in the Rochester, NY, service area. The PSC expects to approve a third set of tariffs for Time Warner AxS of Rochester, L.P. early this year. The new tariffs will allow telephone customers in the Rochester area to choose between the three new market entrants and the existing local carrier, Rochester Telephone Corp.

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