holding company with two subsidiaries: 1) a genco to own all plants, plus contracts with independent power producers (IPPs); and 2) a monopoly to own all transmission and distribution (T&D), plus gas properties. NiMo has threatened an emergency rate case or a Chapter 11 bankruptcy filing if PowerChoice doesn't work.
In a report issued October 11, Dan Scotto, managing director at Bear Stearns, suggested that NiMo was playing "a dangerous game of chicken" by threatening bankruptcy to force renegotiation of existing contracts with IPPs.
"We see nothing in NiMo's financial or operating profile to suggest that it is a bankruptcy candidate," Scotto said. "If the common shareholders took bankruptcy seriously, the stock probably would not be trading in the $11 vicinity. It would trade at a single digit." But he warned bondholders to watch out for the corporate restructuring: "Is our greatest fear about to be realized?"
Heart and Soul
To see how these plans will work, you've got to look beyond the "Mega-NOPR" now pending at the Federal Energy Regulatory Commission. Jeanine Hull, vice president and general counsel at LG&E Energy, observes: "We are moving to a transmission system that will support competition. That is the fundamental goal of the Mega-NOPR."
But the future is murky. The Mega-NOPR introduces new concepts like "available transmission capacity" that nobody really knows how to define, according to David Swanson, senior vice president at the Edison Electric Institute. Swanson warns: "The T&D system is the heart and soul of keeping your generation plant viable strategically."
If Swanson is right, how are electric utilities going to unbundle generation from transmission? People are talking about OpCo's, GridCo's, and PoolCo's. An OpCo would separate ownership from control; the ISO would operate the transmission grid while utilities own the lines. Jeanine Hull calls that "an attorney's worst nightmare." She and others see the industry moving to a GridCo model, with utilities exchanging their transmission plant for stock in the GridCo. But Hull detests the PoolCo model: "It's an OpCo or GridCo with a market function thrown in. That perverts the market."
Whichever model prevails will pose problems. Philip O'Connor, managing director at Palmer Bellevue/Coopers & Lybrand, asks this question: "If I'm an IPP, and if I site my generating plant to relieve a transmission constraint, do I get paid? And how much? And by whom?"
William Rutz, manager of distribution real-time applications for ABB Systems Control, puts it this way: "The control center is the arena where the Mega-NOPR will be negotiated."
Pick and Choose
Whatever happens, it's sure to involve political compromise. But John Anderson and his "guys" at ELCON (see sidebar) may not need to give much.
Jeanine Hull, herself a former committee staffer from Capitol Hill, believes that Congress is warming to competition: "The House and Senate committees are talking electric competition. Not wholesale competition, but retail. They are aware of the experience in natural gas, where very few benefits from competition filtered down to the retail level. They want to make sure that doesn't happen on the electric side."
Eric Hirst, research engineer at Oak