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Looking for a Market Rate

Fortnightly Magazine - February 1 1996

how can this plant be 40 miles away and their electric costs be 5 cents [per Kwh]? Well, that's because their electric provider is Madison Municipal Electric Utility."

Anchor initiated the drive for municipalization simultaneously with its JCP&L negotiations.

The letter to JCP&L calling for a "market-based rate" produced counter offers from the company that Anchor couldn't accept, Schaffer claims, citing clauses for a minimum of 208 hours of interruptible power. ""Our process can't stand that," he says. "You have three furnaces with over 250 tons of molten glass at 2,500, you can't operate with interruption." Not to mention "acres and acres" of digital processing equipment controlling machines that produce more than 300 bottles a minute. Recovery from a 10-second power blip takes three hours.

Furthermore, the rate JCP&L quoted was a tariff, open to any base rate case the company filed, so it wasn't guaranteed. The final straw was that JCP&L didn't want Anchor to look elsewhere for power,

no matter what happens with market deregulation. If Anchor's competition won access to 4-cent power in the next few years under a deregulated market, Schaffer says, the company would be "dead meat."

Also fueling the decision to push for municipalization was Anchor's frustration that out of the $700 million the company spends on goods and services each year, "the only single thing we cannot competitively bid is electricity."

Anchor and JCP&L finally squared off in the

summer of 1995. At Aberdeen township meetings, residents and Council members learned what municipalization entailed. They also discovered that Aberdeen could become the 10th New Jersey municipality to have its own utility. In one corner, Courtney & Associates of Findlay, OH, (paid by Anchor) told ratepayers they would save $19.7 million over nine years, about $200 each year per ratepayer. In the other corner, Stone & Webster of Boston (paid by JCP&L) said ratepayers would pay $35 to $115 a year more on their electric bills over four years.

Schaffer said savings for the township went even further. According to Courtney & Associates estimates, street lighting, which now costs Aberdeen 25¢/Kwh for offpeak power, would be reduced from $180,000 to $40,000 a year. The township's three schools could have saved $60,000 on their electric bills.

One divisive issue was stranded costs.

Schaffer said his side of the fight recognized there would be stranded costs in the estimated $30-million project, but felt it was a win-win proposal despite those costs. He cites the take-or-pay contracts Anchor is charged by gas pipelines: "Even with the take-or-pay in there, our burnertip price went from $5 in MMBtu at the burner tip to $2.50."

The stranded-cost issue won't be fully decided until the Federal Regulatory Energy Commission (FERC) weighs in this spring with a rulemaking on its Mega-NOPR. The FERC expects to inject competition into the wholesale electric market. "Stranded costs and the issue of stranded investment are only going to impede competition," Schaffer protests. "So how do you think FERC is going to rule?"

Utilities' burden of proof would be greater, too.

"Finally, they are going to have the