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Power Marketers: Let's Make a Deal

Fortnightly Magazine - February 1 1995

flow requirements are large, he said.

Since Heartland, at least two other utility-affiliated marketers have been approved by FERC: LG&E Power Marketing Inc., a subsidiary of LG&E Energy Corp., and InterCoast Energy Co., a subsidiary of Iowa-Illinois Gas and Electric Co. Approximately 10 utility-affiliate applications have been filed so far.

Heartland's approval process took about a year. Heartland received approval from the Federal Energy Regulatory Commission last August to buy and sell electricity at market-based rates. The application was filed in the fall of 1993, but discussions with FERC staff actually began the previous summer.

There were numerous hurdles to clear. First and foremost, WPL had to file for an open-access transmission tariff to meet FERC's comparability standards before FERC would grant authority to Heartland to buy and sell electricity at market-based rates.

While Heartland is permitted to buy transmission service from WPL, it may not buy or sell power from WPL without seeking specific approval from FERC. Heartland files quarterly reports that are required of all power marketers.

WPL had to demonstrate it held no market dominance in generation, and FERC accepted the state commission's safeguards on WPL Holdings intended to prevent cross-subsidization among affiliate ratepayers. There is no overlap in personnel between Heartland Energy and the WPL utility.

"I see it as the price of entry," said Friedman. FERC is concerned with self-dealing abuses, he said, but over time some of the restrictions may be relaxed. For example, in the natural gas industry, some independent power producers affiliated with gas distribution companies have been permitted to make sales to those distributors.

Heartland Energy is focusing not only on its core markets in the upper Midwest, but also on the southeastern United States, which Friedman sees as "natural extension" of the Midwest, in terms of the presence of several large multi-state utility systems such as the Tennessee Valley Authority.

To date, Heartland Energy has negotiated about two dozen interchange agreements with more to come, Friedman said. The primary customers have been large-size municipal cooperatives and in some cases, bulk-power utilities.

Heartland is not actively pursuing WPL customers, but because neither company can talk to the other, occasionally both companies have submitted bids on the same projects, Friedman said. "We were not created to focus on WPL's indigenous customer load," Friedman said. "There's plenty of opportunity elsewhere in the country. We're trying to take a national approach."

Heartland Energy's services are not limited to power marketing. It was incorporated in the spring of 1993 as a marketer of natural gas and propane. The company also serves as a broker and consultant.

While some more aggressive power marketers have petitioned FERC to order wheeling across a reluctant utility's transmission system under a revised Section 211 of the Federal Power Act, Friedman disdains the effort.

"We have standing joke. A 211 [filing] is equivalent to dialing 911," Friedman said. While FERC has recently approved the first of such filings, Friedman views it as a "hostile act" and "a peculiar way to start a relationship" with utilities.

-LG

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