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Electric Industry Restructuring: The States Forge Ahead

Fortnightly Magazine - October 1 1995

certain range for customers able to demonstrate access to a less expensive power source (Consumers Power Co., Case No. U-10787, May 9, 1995, 161 PUR 4th 1).3 This case is proceeding before an ALJ.

For its part, the PSC, in response to a request by businesses, issued an Interim Order in April 1994 requiring Detroit Edison and Consumers Power (the state's largest IOUs) to conduct a retail wheeling experiment (Asso. of Businesses Advocating Tariff Equity, Case Nos. U-10143, U-10176, April 11, 1994, 150 PUR 4th 409). Detroit Edison sought a declaratory judgment in Federal district court challenging PSC jurisdiction to order retail wheeling, but this action was dismissed as premature (Detroit Edison Co. v. Strand, 1995 U.S. Dist. Lexis 7262 (W.D.Mich.1995)). That Interim Order affirmed the PSC's authority under state law to require a utility to provide retail wheeling, concluding that the PSC's jurisdiction was not preempted by federal law and that any supplier proposing to sell power to a retail wheeling customer would be subject to state utility law. The PSC emphasized that its action was strictly an experiment to inform future deliberations (em not a finding that retail wheeling is in the public interest. The five-year experiment is limited to 60 megawatts (Mw) of delivery capacity for Consumers and 90 Mw for Detroit

Edison, and will begin only when each utility next solicits for new capacity. At that time, the utilities must submit a proposed retail delivery tariff that will be subject to a contested proceeding.

In June, the PSC gave final approval to the experiment, and addressed the novel issue of appropriate rates unbundled for retail transmission (161 PUR4th 441, June 19, 1995). The approved rates include the following elements:

s A $3,000/month customer service charge, plus $500/month for each additional location served

s A capacity-reservation charge based on the embedded costs of the transmission system and a

12-CP allocation method, which resulted in charges of $1.23 and $1.18 per kilowatt for transmission facilities, and $1.81 and $1.96 per kilowatt for subtransmission facilities

s Provisions for ancillary and line-loss charges

s A substantial "unauthorized use" charge when a wheeling customer's usage exceeds its scheduled or actual power deliveries

s Surcharges for some preexisting regulatory costs, including SFAS-106 amortization, nuclear decommissioning, and amortization of certain previously approved plant construction costs

s No surcharges for DSM, conservation, and PURPA capacity costs

s No charges for stranded investment or opportunity costs, due primarily to the limited nature of the experiment.

The states listed here offer a representative cross-section of the issues of greatest concern across the nation. Although each reached a somewhat different conclusion, all in some way addressed the environment, stranded cost, contracts with independent power producers, and the ultimate separation of generation, transmission, and distribution. We can expect more of the same from other state inquiries. t

Brian R. Gish is an independent attorney who specializes in energy and utility law in the Washington, DC, area.

Report Gives Thumbs DownCiting lack of broad support plus uncertainty over service reliability, a Pennsylvania PUC staff report has given a thumbs down to