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Fortnightly Magazine - May 1 1996

People

Lori A. Burkhart

A Moody's report, Legal Disaggregation Threatens Bondholder Security, warns that bondholders (em previously secured by a blanket lien on substantially all of a utility's property (em may find themselves secured solely by generating assets, whose real market value may be less than the outstanding secured debt. Moody's identifies 14 companies that may spin off transmission and distribution (T&D) assets, retaining generating assets because of indenture restrictions.

MidAmerican Gets Market-Based Rates

Lori A. Burkhart

The Federal Energy Regulatory Commission (FERC) has conditionally approved market-based rates for power sales by MidAmerican Energy Co., finding a lack of generation market dominance (Docket No. ER96-719-000).

In 1994, the FERC granted MidAmerican's affiliate power marketer, InterCoast Power Marketing Co., authority to sell power at market-based rates, conditioned on the submission by Iowa-Illinois Gas & Electric Co. (MidAmerica's predecessor in interest) of a tariff providing comparable transmission service.

Joules

Nearly 18 million households are strong candidates for conversion to natural gas heating. So says the

American Gas Association (A.G.A.). The AGA estimates that 7.6 million natural gas customers don't use gas for heating and about 10.2 million households lack gas service, although it is available in their neighborhoods. To maintain its heating market dominance, the industry plans to promote the advantages of gas to homebuilders as well as to existing and potential customers.

In Brief...

Sound bites from state and federal regulators.

Electric Restructuring. North Dakota opens investigation on electric utility restructuring, asking how direct access might affect state utility customers, given the relatively small number of large commercial users. Case No. PU-439-96-54, Feb. 20, 1996 (N.D.P.S.C.).

Gas Storage Costs.

New Corporate Structures Place Bondholders at Risk

Lori A. Burkhart

A Moody's report, Legal Disaggregation Threatens Bondholder Security, warns that bondholders (em previously secured by a blanket lien on substantially all of a utility's property (em may find themselves secured solely by generating assets, whose real market value may be less than the outstanding secured debt. Moody's identifies 14 companies that may spin off transmission and distribution (T&D) assets, retaining generating assets because of indenture restrictions.

Deregulating Retail Energy Services: First and Subsequent Steps

Michael Arny

One popular model in electric utility restructuring assumes a fully competitive merchant segment providing retail energy services. These "retail energy service companies," or RESCOs, would offer services described as heating, cooling, ventilation, lighting, drive power, information, and communications.

Utility Workers Cautious on Restructuring

Joseph F. Schuler, Jr.

Deregulation places the cost, safety, and reliability of the U.S. electric utility industry at risk. So says the Utility Workers Union of America, AFL-CIO, which represents 50,000 workers at 74 utilities. A UWUA position paper warns that competition could cause shortages and high prices: "This is the standard business cycle.... There is no reason to believe that the laws of supply and demand have been repealed." The paper proposes 11 tenets for restructuring:

s Provide competition for all.

s Respect state control.

Arizona Rejects Holding Company Plan

Phillip S. Cross

The Arizona Corporation Commission has turned down a bid by Tucson Electric Power Co.

James River Refuses $1-Million Cut

Lori A. Burkhart

The James River Corp.'s Dixie Cup manufacturing plant in Darlington, SC, has declined a $1-million rate cut offered by Carolina Power & Light Co. Dixie Cup, which hopes to slash its electric bill by $700,000 a year, or $4.9 million over seven years, said the offer was only one-fifth what it needs. Meanwhile, it has asked the City of Darlington to municipalize its electric system. Dixie Cup has asked for a citizen referendum; the city council is awaiting the outcome of a municipalization feasibility study.

AT&T Enters Local Market in Maryland

Phillip S. Cross

The Maryland Public Service Commission (PSC) has authorized AT&T Communications of Maryland, Inc. to compete with local exchange telephone carriers (LECs) throughout the state as a "co-carrier and reseller." According to the PSC, AT&T plans to enter the LEC market as a reseller, expanding over time to offer a full range of facilities-based services.

By separate order, the PSC opened a new proceeding to set wholesale prices for the components of local exchange services.

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