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Fortnightly Magazine - April 15 1996

Trends

Christopher D. Seiple and Douglas M. Logan

Curbing Market Power:

The Larger, the Better

In recent years, increased competition and the threat of deregulation have spurred numerous mergers and acquisitions. Fourteen mergers have been completed by investor-owned utilities (IOUs) over the last five years; seven more have been announced. If all of these mergers receive approval, nearly 20 percent of the IOUs that existed in 1990 will no longer exist.

Niagara Mohawk Fights Gas Import Tax

Lori A. Burkhart

Niagara Mohawk Power Corp. (NiMo) has asked the Federal Energy Regulatory Commission to rule that a New York state law violates the Public Utility Regulatory Policies Act of 1978 (PURPA) by requiring ratepayers, in effect, to reimburse gas-fired QFs (qualifying facilities) for payments made under a state-imposed, 4.25-percent natural gas import tax.

NiMo says that the tax and the reimbursement mandate will add $7.2 million to the electric bills of its customers in 1996 (em a figure that could climb to $13.5 million by 2006.

Joules

CMS Generation Co., a unit of CMS Energy Corp., has begun operating the 35-Mw, waste-wood-fueled, independent Genesee Power Station near Flint, MI. CMS Generation will sell the electricity to Consumers Power Co. under a long-term contract. Half the plant is owned by CMS, half by Black & Veatch Development Corp. and Genesee Power Co.

Another unit of CMS Energy, CMS Gas and Electric Marketing, has signed an agreement with Marine Coal Sales Co. of Indianapolis, IN, to market electricity, coal, and natural gas in the east central United States.

Financial News

Charles M. Studness

New England Electric System (NEES) and the majority leaders of both houses of the Rhode Island Legislature have proposed legislation that would restructure the state's electric utility industry. The legislation provides for full recovery of all stranded costs, and phases in open access for all retail customers by January 2001. Although customer choice would come about relatively quickly, rates would not decline much in the near term because a transition charge shields NEES from most of the restructuring risk.

Calif. Restructuring Impairs Muni Credit Ratings

Lori A. Burkhart

Moody's Investors Service has completed its Western Grid Surveillance Review, a study that assessed the potential impact of the California Public Utilities Commission's (CPUC's) electric restructuring proposal on municipal utilities in that region.

PL94-4: Pricing for New Pipeline Construction

Jeffrey S. Hitchings

On May 31, 1995, the Federal Energy Regulatory Commission (FERC) issued its Statement of Policy in Docket No. PL94-4-000, Pricing Policy for New and Existing Facilities Constructed by Interstate Natural Gas Pipelines.1 In that decision, the FERC sought to provide upfront rate certainty, thereby giving pipelines and shippers a firm basis for making decisions on large-scale investments.

But is that objective realistic?

Restructuring Moves Forward in Massachusetts

Lori A. Burkhart

The Massachusetts Division of Energy Resources (DOER) has filed its electric restructuring proposal, "Power Choice," as part of the Massachusetts Department of Public Utilities investigation into competition. The proposal will be considered along with restructuring plans submitted by the state's three largest utilities.

Power Choice calls for electric utilities to voluntarily separate into generation and distribution companies. Customers would continue to receive distribution service through their present providers; generation would become competitive.

Reliability, Not Economy, Dictates Transmission Line

Phillip S. Cross

The California Public Utilities Commission (CPUC) has approved a proposal by Sierra Pacific Power Co. to construct a 345-kilovolt overhead transmission line, but not simply to gain access to low-cost power. Instead, the CPUC appeared to emphasize concern over reliability.

Sierra Pacific, involved in merger plans with The Washington Water Power Co., had cited access to low-cost power from the Bonneville Power Administration as an important reason to build the transmission line.

WP&L Withdraws From MAIN

Lori A. Burkhart

Wisconsin Power & Light Co. (WP&L) has announced that it will withdraw from its current regional reliability council, Mid-America Interconnected Network, Inc. (MAIN), effective December 31, 1997. According to president and chief executive officer of WPL Holdings Errol B.

Price-cap Reforms Reflect Local Competition

Phillip S. Cross

Citing heightened competition and lower earnings in the state's local exchange telephone market, the California Public Utilities Commission (CPUC) has frozen price caps for local exchange carriers (LECs) for most noncompetitive local services, and has suspended the 5-percent "x-factor" services for an intermediate level of competition.

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