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Fortnightly Magazine - October 15 1995

Perspective

J. Michael Parish

One of the iron rules of competition and open markets is that there are winners and losers. Winners tend to win very big; losers tend to lose everything and disappear, through absorption or insolvency. As deregulation takes hold, high-cost producers and less adroit managers may find themselves steamrollered by emerging strongmen and entrepreneurial upstarts. These rivals may usurp segments of their business by bidding the job cheaper and still making money, leaving a rising tide of shareholder suits in their wake.

Commentary: Making Restructuring ProfitableRalph Cavanagh

Ralph Cavanagh

Investments that minimize life-cycle costs of reliable energy services should be more profitable to utilities than those that fail that test. This perceptive article shows that Puget Power and the Washington Utilities and Transportation Commission (UTC) share that view.Too many utilities still hesitate to finance energy savings that cost less than the displaced power production.

GAO Reports, TVA Retorts

Lori A. Burkhart

The U.S. General Accounting Office (GAO) has released its report on the Tennessee Valley Authority (TVA), Financial Problems Raise Questions About Long-Term Viability (em a report that TVA strongly disputes.

Utility Finance After the TransitionJames T. Doudiet, John Higley, and Patricia Eckert

James T. Doudiet, John Higley, and Patricia Eckert

DOUDIET:Stranded investment has overshadowed other financial issues in the transition to a competitive electric utility industry. For example, what will post-transitional companies look like? Will they attract growth-oriented investors?

Utilities as monopolies enjoyed unparalleled access to the capital markets because price was based on cost. That structure assured the ability to raise funds under any and all circumstances, but it created an atypical industry.

GRI: Low Energy Prices Are Coming

Lori A. Burkhart

The Gas Research Institute (GRI) thinks total natural gas demand, driven by strong underlying economic activity, could grow to more than 29 quads by 2015, a 1.5-percent yearly increase from 1994's 21.4 quads (see, Baseline Projection of U.S. Energy Supply and Demand, GRI, 1996 ed.). This latest projection "describes an era of low energy prices, not just low oil prices," said Paul D. Holtberg, GRI executive economist, baseline analysis.

According to the report, gas demand for electric generation will account for half the growth.

Mandatory Wheeling: Is the FERC Overstepping its Bounds?Donald B. Craven and Anthony F. Shelley

Donald B. Craven and Anthony F. Shelley

In its recent Notice of Proposed Rulemaking (NOPR) on wholesale competition and open-access transmission,1 the Federal Energy Regulatory Commission (FERC) has outlined a plan to revolutionize the electricity industry.

Otter Tail Pursues WAPA

Lori A. Burkhart

Otter Tail Power Co. (OTP) president John MacFarlane is pursuing the utility's plan to manage the assets of a portion of the Western Area Power Administration (WAPA) for a five-year period, to smooth the way toward privatization of the nation's power marketing agencies (PMAs).

MacFarlane has written for support to the senators who represent OTP's utility's three-state service area: Byron Dorgan (D-ND), Kent Conrad (D-ND), Tom Daschle (D-SD), Larry Pressler (R-SD), Rod Grams (R-MN), and Paul Wellstone (D-MN).

Electric Restructuring: NOt by FERC AloneVito Stagliano

Vito Stagliano

The restructuring of electric utilities is fundamentally a matter of national policy (em not a regulatory issue. Regulators are ill-suited to make national policy because they are conditioned to act within the limits of authority specifically granted by legislation, rather than to seek a fresh statutory mandate in response to changed conditions. Policymakers must assess political, social, economic, technological, regional, and national factors to measure the need for reform.

Columbia Gas Seeks Market Rates

Lori A. Burkhart

As part of a request to increase annual revenues by approximately $147 million, Columbia Gas Transmission has asked the Federal Energy

Regulatory Commission (FERC) to approve a set of market-based rates for short-term firm transportation, interruptible transportation, temporary capacity release, and storage services (Docket No. RP95-408).

Can the FERC Overcome Special Interest Politics?Jim Rossi

Jim Rossi

The competitive transformations of the natural gas and telecommunications industries are over a decade in the making. By contrast, competition in the electricity industry is still emerging. Special interests have defeated many proposed competitive reforms. For example, in 1988 the FERC failed in its attempt to adopt regulations to encourage competitive bidding and independent power producers (IPPs).1 Similarly, decades of forceful industry opposition delayed open access in bulk-power markets.

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