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Retail Aggregation: A Guaranteed Right for Small Customers?

Fortnightly Magazine - April 15 1996

city plans to ask the Federal Energy Regulatory Commission (FERC) whether installing a second set of electric meters at city homes and businesses will qualify the city as an electric distribution utility under the Energy Policy Act of 1992, which allows municipal utilities to choose their own wholesale power supplier. Edison would wheel the electricity and also supply those customers who reject the single wholesaler the city will select from its short list.

The city hopes to undercut Edison's rates, which run 50 percent above the national average. Edison rates range from 12.4 to 14.2 cents per kilowatt-hour (cent/Kwh); wholesale electric is available for as little as 3.5 cent/Kwh.

"I think the FERC likes the idea of competition and creating competition, and the idea we're not just condemning out Edison's facilities," says Harold E. Good, city purchasing manager. "They can still compete. I think it's the kind of marketplace [the FERC] envisions for the future.

"We have pretty high hopes that they're going to like the idea."

Good can hope, but victory remains a question mark, given unfolding changes in federal regulation. Fees for the recovery of stranded costs alone, which federal regulators expect to set this month, could wipe out any projected savings.

What remains unclear is just how much plant a city must operate to qualify as a municipal "utility." But Palm Springs has a toehold because of the 1.2-megawatt cogeneration plant it built in 1983 after a friendly condemnation with Edison.

"The FERC may decide that we're unique because we have a foot in the door," Good says. "Or they may decide this 'freedom of choice' idea is great and make a decision with broader implications."

The purchasing manager says most of the power wholesalers on the city's short list are utility subsidiaries that could provide related administrative services, such as billing. The city's intention isn't to create new infrastructure.

Manager Good estimates conservatively that, given the choice, 70 percent of Palm Springs residents will opt for the second meter.

Palm Springs initially looked at the citywide condemnation, then found the cost (including litigation) beyond its reach. After hearing about Falls Church and its plans, Palm Springs hired the Washington, DC, law firm of Duncan & Allen, which also represents Falls Church. Meanwhile, businesses and residents in Palm Springs have donated thousands of dollars to support the initiative.

"We're very optimistic," says Good.

1. Re Retail Competition Pilot Program, DR95-250, Order No. 22,033, Feb. 28, 1996 (N.H.P.U.C.).

2. See, Case 94-E-0952, Opinion No. 95-7, June 7, 1995, 162 PUR4th 1 (N.Y.P.S.C.).

3. Re Proposed Policies Governing Restructuring California's Electric Services Industry and Reforming, Regulation, Decision 95-12-063, Dec. 20, 1995, modified by Decision 96-01-009, Jan. 10, 1996, 166 PUR4th 1 (Cal.P.U.C.).

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