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Fortnightly Magazine - April 1 1996

CFTC Approves NYMEX Futuresb Contracts

Lori A. Burkhart

The Commodity Futures Trading Commission (CFTC) has approved the New York Mercantile Exchange (NYMEX) applications for electricity futures contracts on delivery at the Palo Verde Switchyard in Arizona and at the California-Oregon border (COB).

Both contracts use a unit of 736 megawatt-hours (Mwh) delivered over one month. The delivery rate is 2 megawatts in every hour of the delivery period of 16 onpeak hours (0600 to 2200 hours). Both the rate and the period may be amended by mutual agreement of the buyer and seller.

Virginia Sets Rules for Local Telco Competition

Phillip S. Cross

The Virginia State Corporation Commission (SCC) has approved final rules for competition in the state's local telephone market, providing minimum certification and other standards for new market entrants. The rules permit subsequent negotiated resolution of controversial issues, such as interconnection rates and terminating traffic compensation, and preserve the right to evidentiary hearings when needed.

KCPL and UtilCorp Take the Merger Plunge

Lori A. Burkhart

Kansas City Power & Light Co. (KCPL) and UtiliCorp United have propose to merge in a stock transaction valued at about $3 billion. Like MidAmerican before them, the utilities are calling the deal a "merger of equals" that will result in a company with about $6.4 billion in assets and about 2.2 million customers.

KCPL shareholders will receive one share of stock for each share of KCPL common stock; holders of UtiliCorp common stock will receive 1.096 shares. There are about 62 million shares of KCPL common stock and 46 million shares of UtiliCorp common stock outstanding.

Conn. Reviews Executive Compensation

Phillip S. Cross

The Connecticut Department of Public Utility Control (DPUC) has finished investigating levels of compensation for selected utility officials. The study followed allegations by the state's Attorney General that certain pay increases to state officials appeared excessive and might contribute to higher utility costs or "adversely affect economic development" in the state.

In particular, the Attorney General cited executive salaries at Connecticut Natural Gas Corp. and Connecticut Energy Corp., parent corporation of Southern Natural Gas Co.

N.H. Wheeling Pilot Nearly Ready

Lori A. Burkhart

The New Hampshire Public Utilities Commission (PUC) has adopted second revised guidelines for its retail wheeling pilot program. The pilot is independent of full restructuring efforts.

The collaborative group working on the guidelines was unable to make a joint recommendation on stranded costs, but the PUC found no reason to deviate from the 50/50 split, with a true-up where needed. The pilot is limited to 3 percent of each utility's peak load for two years. Participants will be randomly selected from a pool of interested customers.

AT&T No Longer Dominant in Florida Market

Phillip S. Cross

The Florida Public Service Commission (PSC) has found that the state's long-distance telecommu-nications market is

sufficiently competitive to permit equal levels of regulation for AT&T Communications of the Southern States, Inc. and all other interexchange carriers.

Fossil in Your Future? A Survival Plan for the Local Gas Distributor

Vincent J. Esposito III

LDC Minimus, LDC Insipidus,

LDC Robustus? Which Would You Rather Be?

Post-Order 636 evolution depends on aggressive regulatory and legislative reform.

"Get out of the gas business. Drop the merchant function. We can't make any money selling gas and we are constantly at risk to having gas costs disallowed. It's a no-win situation.

Bright Outlook for Muni Credit Ratings

Lori A. Burkhart

Standard & Poor's (S&P) has issued its first quarterly report on public power and rural electric cooperatives: Muni Utility Ratings: 1995, 1996, and Beyond. The report predicts that the shakeout in credit quality that has characterized the municipal utility industry since 1993 will continue in 1996. Downgrades and negative outlook assignments will continue to outpace positive ratings actions, but not at the 1995 rate.

State Reviews Marginal Cost Pricing for Gas LDC

Phillip S. Cross

While examining cost allocation and rate design for natural gas distribution services provided by Pacific Gas and Electric Co., a local distribution company (LDC), the California Public Utilities Commission (CPUC) has concluded that the long-run marginal cost method it adopted in 1992 was not proving effective in producing prices observed in fully competitive markets.

Decontracting: Stranded Costs for Interstate Pipelines?

Rebecca A. McDonald

Competition from Order 636 has gas customers rethinking their firm capacity options.

Just when everyone thought we had put Order 636 behind us, up pops perhaps our greatest challenge yet: the turnback (or "decontracting") of firm capacity on interstate natural gas pipelines. This phenomenon, now emerging on a few major pipelines, such as Transwestern, El Paso, and Natural Gas Pipeline Co. of America, inspires different reactions.