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Fortnightly Magazine - July 15 1996

The Discount Debate: Recent PUC Rulings On Local Exchange Resale

Now that incumbent LECs must offer all services for resale, state regulators must decide the appropriate level of discount for the new resale tariffs.

Discounts could put incumbent LECs at a disadvantage, since many local exchanges already price below the cost of service, particularly for basic residential access.

FERC Responds to EPA's Open-access Challenge

Lori A. Burkhart

On May 13, Environmental Protection Agency (EPA) Administrator Carol M. Browner referred the Federal Energy Regulatory Commission's (FERC's) open-access rule, Order 888, to the Council on Environmental Quality (CEQ). In effect, Browner has asked the Clinton Administration to intervene in the restructuring process.

Browner feels that under certain circumstances the open-access rule could lead to future increases in air pollution. She believes these impacts can be minimized through a combination of actions by EPA and states under the Clean Air Act (CAA).

Discount Rates Urge Restructuring in Penn.

Phillip S. Cross

The Pennsylvania Public Utility Commission (PUC) has authorized Duquesne Light Co. to expand its economic development rate initiatives to include small industrial customers. The new rate rider provides a five-year discount on demand charges on a maximum of 100 kilowatts (Kw) for new or existing customers smaller than 100 Kw. If the utility's service territory is to recover from the steel industry's devastating downturn, the PUC argued, Duquesne must be able to offer a competitive rate to keep industrial operations of all sizes.

Model and Parameters

Objective. Estimate market impacts of "1+" dialing parity plus eliminating traditional LATA boundary.

Model. Measure shifts in market dominance between major competitors, by assuming price changes and estimating revenue impacts across range of demand elasticities, to reflect both changed rates and market shares. Also consider changes to revenues collected by U S WEST through carrier access charge (CAC).

Scope. Limited to residential toll calls carried by AT&T and U S WEST. Does not examine commercial toll customers.

Data.

Filing Announces New Generation of Mergers

Lori A. Burkhart

Two utility merger lawyers at LeBouef, Lamb, Green & MacRae predict that the Federal Energy Regulatory Commission (FERC) will continue to receive many merger applications, though some will differ from the classic merger between neighboring utilities. Douglas W. Hawes and Samuel Behrends IV have filed comments in the FERC's merger rulemaking proceeding, recommending that the FERC implement "fast track" proceedings for the next generation of mergers.

Off Peak

While the cost of common household goods like bread and milk increased 77 and 50 percent, respectively, from 1985 to 1995, the average residential electricity bill for customers of San Diego Gas & Electric Co. (SDG&E) dropped 13.6 percent over the same period, according to San Diego Chamber of Commerce statistics.

That trend shows no sign of abating. In fact, low rates are fast becoming a staple for the utility's 1.2 million electric customers.

Discounts Defined

Flexible pricing schemes generally fall into four categories:

Load Retention Rates. Can prevent a customer from exiting system, either by relocating or choosing to self-generate. If retail competition is allowed, load retention rates can prevent customers from choosing a different generation company.

Economic Development Rates. May attract new customers to a service territory, or encourage existing customers to expand operations and boost demand. Differ from load retention rates by purporting to create jobs.

Flexible Rates (Flexrates).

Primergy Merger Raises Claims of Market Power

Lori A. Burkhart

Madison Gas and Electric Co. (MGE) has asked the Federal Energy Regulatory Commission (FERC) not to approve the proposed merger of Wisconsin Energy Corp. (WE) and Northern States Power Co. (NSP) to form "Primergy." MGE claims that the merger would not only subject Wisconsin's electric consumers to higher prices, but severely impair competition.

According to Mark Williamson, MGE senior vice president of energy services, the Primergy merger would create market concentration in generation and transmission, resulting in market power abuses and anticompetitive conduct.

NARUC Turns Gaze Inward

After a year and two task forces, the National Association of Regulatory Utility Commissioners (NARUC) could soon have a new structure.

"With all these industry changes, we need to look internally, as commissions are also being asked to change, to see what changes will compliment what's happening out there in the industry," says John Gawronski, NARUC spokesman.

Nader Group's Restructuring Plan Puts Consumers First

Joseph F. Schuler, Jr.

The belief that competition will take over for regulation is a "fairy tale approach" to

electric industry restructuring.

That's what Matthew Freedman, energy policy analyst, announced at a Public Citizen briefing on the advocacy group's Power for the People, a "public interest blueprint" for the new electric market.

"Competition in the electric power industry could either usher in a new era of cleaner, more affordable energy services or prove to be the biggest customer shakedown of our time," the report reads.

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