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Electric Industry Restructuring: The States Forge Ahead

Fortnightly Magazine - October 1 1995

"Collaborative" submitted a consensus document, Set of Interdependent Principles, to the Public Utilities Commission (PUC) on May 12. Its 17 principles were signed by representatives of the Division, utilities, consumer groups, environmental groups, and cogenerators, and after some revisions, supported by the state's Attorney General. The principles were intended to form the basis for a more detailed restructuring proposal:

s Customers should have the option to specify different levels of firmness and power quality, and should be held accountable for their specifications.

s Existing utility commitments arising from the regulatory compact should be honored, and contracts with IPPs and QFs are enforceable in accordance with their terms.

s Utilities should recover legitimate and verifiable stranded costs, but they must mitigate these costs on a net basis by taking into account both above- and below-market resources. Charges to recover stranded costs should apply only to customers within a utility's retail franchise territory.

s Generation must be functionally separated from transmission and distribution, and subjected to increased competition.

s Each competitor's fossil-fueled power plants must meet today's emissions standards for new units on an overall basis through retirements, replacements, controls, or offsets.

s Cost-effective and regulator-approved DSM programs should continue at least during transition, and their costs be included in nonbypassable, nondiscriminatory, appropriately structured charges.

s Costs to support clean and renewable resources, at least during transition, should be included in nonbypassable, nondiscriminatory, appropriately structured charges.

On July 20, 1995, in restructuring Docket 2320, the PUC accepted all the principles, except that which allowed cost recovery of clean and renewable energy resources. The PUC expressed concern that special support for clean and renewable resources would undermine the goals of lower electric rates and reliance on market forces. Although the Collaborative reiterated its support for this principle, the PUC stuck to its decision In re Electric Industry Restructuring, Dkt. 2320, Aug. 16, 1995 (R.I. P.U.C.) It asked the Collaborative to prepare a more detailed restructuring proposal and submit a progress report by February 1, 1996. The Collaborative has agreed to proceed on this basis.

While this Collaborative activity was going on, the Rhode Island legislature, to the surprise of many, passed bills at the end of June to authorize the state's Port Authority to solicit for power purchases and to supply power to any industrial customer in the state. The Governor eventually vetoed the legislation, but only after the state's largest investor-owned utility (IOU), Narragansett Electric, agreed to cut industrial rates and to file a proposal by June 1, 1996, to allow large power customers in the state open access to the retail distribution system.


In February the Massachusetts Department of Public Utilities (DPU) opened its inquiry into electric restructuring, posing a detailed list of 43 issues for public comment (Re Electric Industry Restructuring, D.P.U. 95-30, Feb. 10, 1995, 160 PUR4th 76). In June, about 20 diverse parties participated in a mediated discussion to reach agreement on a set of core principles to guide industry restructuring in the state. The result, submitted to the DPU on July 17 by a broad coalition, was 18