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Fortnightly Magazine - May 15 1996

Stranded Costs: Is the Market Paying Attention? (A Look at Market-to-Book Ratios)

Agustin Ros, John L. Domagalski, and Philip R. O'Connor

Investors are taking stock

of utility exposure to price competition.The utility trade press and even the general financial press have featured the views of regulators, utility executives, legislators, and various consumer advocates on the stranded-cost question. Stranded costs easily represent the most contentious issue facing the electric industry as it moves to an era of competition.

Senate Panel Continues Inquiry into Electricity'sw Future

Joseph F. Schuler, Jr.

If the new rules of electric industry competition don't permit stranded-cost recovery, the credibility of the U.S. government would be seriously undermined. Or so an executive of one of the country's largest utilities told a Senate energy panel."We just have to keep in mind we incurred these costs based under what the rules were," said Jerry Jackson of Entergy Corp. "If the government is going to change those rules . . .

Stranded Investment: Is the Sale Worth Keeping? (A Look at Utility Options)

Stan Hadley, Eric Hirst, and Lester Baxter

Giving up today's customer to retail wheeling could help cut losses tomorrow.

Estimates of stranded investment for U.S. investor-owned electric utilities (IOUs) range from as little as $20 billion to as much as $500 billion (em more than double the shareholder equity in U.S. utilities.

FERC: "High-Low" Gas Pricing Prevents Gaming

Lori A. Burkhart

The Federal Energy Regulatory Commission (FERC) has approved Texas Eastern Transmission Corp.'s (TET) proposed revisions of its monthly imbalance cash-out mechanism (Docket No. RP96-142-000).

TET had asserted in February that its monthly imbalance mechanism enabled shippers to game the cash-out mechanism during the recent rapid and large price fluctuations in the spot gas market.

Evolution or Revolution? Dismantling the FASB Standard on Decommissioning Costs

John S. Ferguson

If approved as proposed, the new accounting standard

for closure or removal of long-lived assets

will bring costs out into the open.

But is it rational?

On February 7, 1996, the Financial Accounting Standards Board (FASB) issued for comment an "Exposure Draft" of a new proposed statement of financial accounting standards pertaining to nuclear plant decommissioning and other similar legal obligations,

FERC OK's Affiliate Resale

Lori A. Burkhart

The Federal Energy Regulatory Commission (FERC) has conditionally allowed QST Energy Trading, Inc., a subsidiary of Central Illinois Light Co. to make sales to nonaffiliates as well as to an affiliate, QST Energy, Inc. (FERC Docket No. ER96-553-000). In turn, QST Energy would sell power in Illinois to customers located outside the service territory of Central Illinois.

A Milestone Year: Power in the Commodity Markets

Edward Krapels and Vito Stagliano

Paper trading is here, introducing an element of speculation in wholesale electric markets.The electric power industry joined the commodity markets on March 29, 1996, when power futures began to trade on the New York Mercantile Exchange (NYMEX). This first tentative step in the commoditization of electricity promises the emergence of a paper market for power, which, as in the case of other commodities, will likely prove substantially broader and more complex than electricity's physical market.

NEES Proposes Transmission Sub

Lori A. Burkhart

The New England Electric System (NEES) has filed with the Federal Energy Regulatory Commission (FERC) and the Securities and Exchange Commission for authority to separate

generation and transmission, and to create a

transmission subsidiary called NEES Transmission Services, Inc. NEES Transmission has filed proposed transmission tariffs at the FERC that would give its wholesale customers, including New England Power Co.

Frontlines

Bruce W. Radford

I don't know about you, but the Internet is driving me carzy. Every week I discover a half-dozen new home pages to add to my reading list. Some may view NetscapeÔ as an investment play. I see it as drama.

As a magazine editor (em someone who gets paid to follow the news (em I feel guilty if I don't click on every link and download every file. I call it the "obligation to surf." And the problem grows worse as more government agencies post their decisions online.

Ohio Court Overturns Price-cap Plan

Phillip S. Cross

The Ohio Supreme Court has overturned an alternative regulation price-cap plan approved by the state public utilities commission (PUC) for Ameritech Ohio, a local exchange telephone carrier (LEC) formerly known as the Ohio Bell Telephone Co. The court also expressed "grave concern" that the PUC had accepted a partial settlement agreement in the case without the participation of the LEC's competitors.

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