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Fortnightly Magazine - May 15 1996

increase in annual rates for the two Centerior subsidiaries. On the other hand (em accepting consulting firm Hagler Bailly's opinion that Centerior's contingency plans were "dangerously inadequate" (em the PUC recommended that the companies write off $1.25 billion in assets. Clearly, the PUC feels that today's competitive environment makes it highly unlikely that Centerior will ever recover those assets (em even without retail wheeling:


"Our findings are based on the competitive situation today. .. . We are not even considering the advent of retail wheeling, which will put additional competitive pressure on the companies."

Legal scholars take note: The PUC denied arguments that a writedown would confiscate Centerior's property, or that such action would ignore "possible future legislation" that might permit recovery of all or part of the company's stranded investment.

Awaiting the Finale

At press time, the Federal Energy Regulatory Commission (FERC) had not yet released its final rule in the electric "Mega-NOPR" docket on electric transmission and stranded investment (em nor had it offered any clues on the Internet.

By contrast, various cyberspace drafts circulated in early April previewed documents to be filed April 29 by the three major IOUs in California. All request authority from the FERC to sell bulk power at market-based rates through the Western Power Exchange (WPEX), and to convey operational dispatch control of certain designated facilities to an independent system operator (ISO).

As late as April 17, however, National Independent Energy Producers (NIEP) was filing comments urging the FERC to define and mandate ISOs as part of the Mega-NOPR or some subsequent FERC action. NIEP chair Ellen Roy, vice president of Intercontinental Energy, clarified the organization's concern:

"We work with the power pools every day, and the transmission owners are in control. Frankly, we don't think anyone can fine-tune these existing organizations into a true ISO. ... [I]t has to be built from the ground up."

Earlier, I had talked with Les Stark, manager of federal regulatory affairs at Southern California Edison Co., who assured me that the WEPEX model will not conflict with the Federal Power Act or the FERC's vision of a competitive electric industry.

"When you have an ISO," said Stark, "Anyone has the right to inject power into the system. But the notion that you can purchase specific rights on the transmission system is a fiction. Instead, you have a right of access into and out of the system."

To a certain extent, Stark suggested, the pool approach duplicates rights inherent in the FERC's pro forma tariffs: "The FERC required a long-term, firm point-to-point transmission contract. The pool provides the equivalent right in two steps: First, IPPs have right to interconnect; Second, IPPs can hedge the variable transmission cost through a transmission congestion contract."

And Stark fully believes the WEPEX ISO will remain independent: "The ISO will run the system, but Edison will maintain it. The ISO will not have a financial interest in the transmission system (em like an air-traffic controller."

As for timing, Stark considers the FERC's final rule completely separate from the WEPEX filing on April 29: