You've heard talk lately about the convergence of electricity and natural gas. That idea has grown as commodity markets have matured for gas and emerged for bulk power.
The Federal Energy Regulatory Commission (FERC) has denied rehearing of an order authorizing Duke Energy Marketing Corp. and two affiliates, Duke Energy Marketing Corp. and Duke/Louis Dreyfus L.L.C., to sell power at market-based rates (Docket Nos. ER95-755-001, et al.). The
tariffs, which were previously set for hearing, are subject to FERC's final ruling on the Notice of Proposed Rulemaking (NOPR) on open-access.
Duke argued that its proposed transmission rates should not have been set for hearing because it followed the NOPR's guidelines as well as the FERC's guidance orders [American Electric Power Service Corp., et al., 70 FERC ¶ 61,358 (1995) order on reh'g, 71 FERC ¶ 61,393 (1995) order on reh'g, 72 FERC ¶ 61,287 (1995)].
Duke added that because its first rate order was unclear as to which rate issues were set for hearing, it could be required to litigate a full cost-of-service case on the Stage One rate that the FERC already found just and reasonable in the NOPR. [The NOPR suggest two methods of calculating Stage One rates: 1) Use company-specific fixed-charge rate and company-specific information on investment costs and loads, or 2) Use an industrywide transmission fixed-charge rate (the FERC suggest 17.5 percent) and company-specific information on investment costs per kilowatt.]
The FERC maintained that its actions were consistent with the NOPR and its decision in Illinois Power [73 FERC ¶ 61,026 (1995)]. Nevertheless, it set a hearing to investigate whether Duke's adoption of the industrywide transmission fixed-charge rate results in just and reasonable rates. The FERC said Duke was not being asked to defend the reasonableness of using an industrywide approach.
In Illinois Power, the FERC accepted rates based on a levelized fixed-charge method, because it found the charges were just and reasonable. The FERC could not make the same finding for Duke, however, because the fixed-charge rate of 17.5 percent that Duke proposes is not current and does not produce a company-specific result (em unlike a company-specific fixed-charge rate of 14.5 percent, which was used in Illinois Power.
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