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Electric Industry Restructuring: The States Forge Ahead

Fortnightly Magazine - October 1 1995

divesting utilities of facility ownership.

Individually-owned System. Similar to the existing structure, but emphasizing equal access and fair pricing on a regional basis.

In August, the Committee submitted its interim report on generation, which also set forth three alternatives:

Flexible Regulation Model. Existing generation would remain subject to regulation; new generation would be determined through competitive bidding.

Incremental Change Option. Existing generation could remain subject to regulation or be placed in a separate company under contract to the utility, subject to cost-based regulation; new generation would be built by unregulated business entities.

Commercial Model. All generation would be subject to deregulation following a controlled transition period.

The Advisory Committee planned to complete its distribution system recommendations in September, and submit a final consolidated report to the PSC by the end of October, which would allow the PSC to make recommendations to the legislature by the end of December.

The Wisconsin PSC also directed its staff to prepare an environmental impact statement (EIS) as part of the restructuring docket. A draft EIS, released in July, focused on two scenarios considered to define the boundaries of possible action: 1) the status quo alternative, and 2) the "plausible extreme" alternative (which represents the deployment of competitive market forces to the maximum realistic degree). Under the plausible extreme alternative, utilities would divest generation, which would become market driven; a privately owned statewide TransCo would own all transmission as a price-regulated monopoly, and would build all transmission facilities that would provide economic benefits; the distribution system would be owned and operated by a regulated "LineCo"; and retail service would be provided by unregulated "RetailCos." The draft EIS concluded that implementation of the plausible extreme alternative could cause electric prices to fall in the short term, rise in the long term and become more variable and unpredictable; energy conservation and DSM would likely decrease, but load

management would remain stable or increase; increased electric imports into Wisconsin would cause a net short-term decrease in air pollution from instate generators; and more transmission lines would be built, with resulting environmental impacts. The final EIS is due at the end of October.

Michigan

Restructuring efforts in Michigan have followed several paths. The Public Service Commission (PSC) staff has been preparing an analysis, Proposal M, of what should be done to eliminate excess regulation and promote customer choice. The draft was circulated for comments during the summer, and a final proposal was expected at the Governor's office in early September. The PSC was not directly involved in this effort.

Another effort involves state IOU proposals of specific actions to deal with competition for their customers. The Detroit Edison Co. proposed, and the PSC approved, contracts with the Big Three auto manufacturers that make Detroit Edison their sole supplier in return for discounted rates (The Detroit Edison Company, Case No. U-10646, March 23, 1995, 160 PUR4th 132 (1995), reh'g. denied, Re The Detroit Edison Co., 162 PUR 4th 163 (Mich. P.S.C. 1995)). Consumers Power Co. filed a competitive rate tariff in January 1995 that would allow it to negotiate charges within a