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Fortnightly Magazine - January 15 1996

Mexico Promotes Natural Gas Competition

Lori A. Burkhart

The Government of Mexico on November 8 revealed its new natural gas regulations at a special conference of industry executives in Mexico City. The new rules promote use of natural gas; create a competitive, market-driven gas industry; encourage private investment; enhance customer choice; and protect the environment. Private-sector transmission, distribution, and storage of gas were all previously controlled by the state.

Conference attendee Thomas A. Page (em chairman of San Diego Gas & Electric Co.

LDCs Test Supply-cost Incentive Mechanisms

Phillip S. Cross

The New York Public Service Commission (PSC) has approved its first market-indexed incentive mechanism to encourage a local distribution company (LDC) to control gas-supply costs. Brooklyn Union Gas Co.'s modified proposal for a one-year pilot incentive mechanism employs an external index as a gas-cost target (the monthly closing natural gas contract price on the New York Mercantile Exchange), rather than a series of internal cost measures based on estimated fixed and variable costs.

Two Penn. Utilities Offer Restructuring Proposal

Lori A. Burkhart

In the second phase of the Pennsylvania Public Utility Commission's (PUC's) investigation into electric industry restructuring, Metropolitan Edison (ME) and Pennsylvania Electric (PE) have proposed a regional wholesale electricity market based on the Pennsylvania-New Jersey-Maryland power pool. All electric generators would sell into the market, which would function as a spot market, while accommodating bilateral contracts.

The pool would coordinate all power sales and purchases to assure the reliability and integrity of the regional electric grid.

Off Peak

Privatizing the grid doesn't appear to have hurt the United Kingdom any. Quite the contrary. When it comes to electricity, at least, Britannia still rules to some extent.

Industrial prices in the United Kingdom continue to be among the most competitive in the world, according to an Electricity Association (EA) survey. Industrial contract prices are now 49 percent cheaper than in Japan, and 41 percent less than in Germany. Average prices in Italy, Spain, and the United States are also more expensive.

PacifiCorp to Buy Australian Utility

Lori A. Burkhart

PacifiCorp's wholly-owned subsidiaries, PacifiCorp Holdings, Inc. and PacifiCorp Australia Holdings Pty Ltd., have agreed to purchase Powercor, an electric utility in southeast Australia, for about $1.6 billion. Powercor is one of five distribution companies being sold by the State of Victoria in its first stage of privatizing distribution and generation utilities. Moody's Investors Service has placed the ratings of PacifiCorp and PacifiCorp Holdings on review for possible downgrade.

Merge N.Y. Utilities, Says Sithe

Lori A. Burkhart

Sithe Energies Inc. claims that its restructuring proposal, "Energizing New York," would save ratepayers $15 billion over 10 years, while creating a favorable environment during the transition to competition.

Interstate Energy Corp.: A Three-way Tie

Lori A. Burkhart

In the first three-way merger in utility history, IES Industries Inc., Interstate Power Co., and WPL Holdings, Inc. propose to combine as Interstate Energy Corp. The companies project merger savings of about $700 million over a 10-year period. If approved by regulators and shareholders, the proposal would result in a corporation with market capitalization of about $2 billion, and assets of almost $4 billion. Interstate would rank 34th among U.S. utility holding companies, based on 1994 revenues.

Columbia Gas Reorganization Approved

Lori A. Burkhart

The Chapter 11 reorganization plans for The Columbia Gas System, Inc. (CGS) and Columbia Gas Transmission Corp., its principal pipeline subsidiary, were confirmed on November 15 by U.S. Bankruptcy Court Judge Helen Balick. The reorganization plans call for a distribution of about $2.3 billion to pay debt owed by the corporation prior to its Chapter 11 filing, plus another $1.1 billion in interest on that debt. According to CGS chairman Oliver G.

Perspective

James W. Moeller

The decision in September by Malcolm S. Forbes, Jr., millionaire businessman sans political experience, to launch a bid for the White House in 1996 prompts comparison with another millionaire businessman and political neophyte, Wendell L. Willkie, who defied conventional wisdom 55 years ago and won the GOP nomination to oppose Franklin D. Roosevelt in the 1940 Presidential election.

Forbes himself relishes the comparison.

Laissez Ies Bons Temps Rouler: NARUC's 107th Convention

Joseph F. Schuler, Jr.

Change was the operative word this year in New Orleans at the annual gathering the National Association of Regulatory Utility Commissioners. Bob Anderson, Montana commissioner and outgoing president of NARUC, cited global competitiveness, technology and a political swing toward state's rights in his opening address. "State commissions have to respond to these powerful forces," he warned.

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