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Fortnightly Magazine - July 1 1996

with Generally Accepted Accounting Principles.

Crews claims that privatizing the PMAs would impose no rate impact on consumers. But he and others clearly acknowledge rate increases by proposing legislative or regulatory measures to stem them.

As for equating still-unknown benefits of electric utility deregulation with what has happened in the telephone industry, we hope Crews saw the front page of The Washington Post on May 7, where we read that phone companies nationwide are proposing to raise local phone rates to offset lower rates for long-distance and add-on services. Down the road, the net effect may just be what many have feared: The average consumer will be faced with higher bills just for basic service.

Consumer-owned utilities' long-term contracts for PMA power have built many decades of equity investment in those facilities, which would be lost if the PMAs were to fall into the hands of IOUs. The IOUs themselves, when renewing their own licenses to operate dams on federal waterways, have pointed out their heavy investment in facilities and the unfairness of taking away that investment. We agree with that argument, and believe both equity positions should be honored.

Crews himself is "out of his depth" and "treading water" with his specious philosophical and economic arguments. Readers of your serious and respected magazine deserve better.

Alan H. Richardson, Executive Director, American Public Power Association

Glenn English, CEO, National Rural Electric Cooperative Association

Automakers' Malarkey

How ironic reading Peter Mehra, a representative of Ford Motor Co., whine about Ford's electric rates in Michigan versus what Japanese companies pay in Tennessee and Kentucky ("Senate Panel Continues Inquiry into Electricity's Futures," May 15, 1996, p. 37). Mr. Mehra pushes this same malarkey at a different conference every month. What he doesn't discuss are Japanese electric costs when producing cars in Japan. Industrial electric rates are 95 percent higher in Japan than they are in the United States. In fact, industrial rates in Japan are 65 percent higher than in Michigan.

If American automakers produced a product comparable to that of the Japanese, they would have been building additional plants in Tennessee and Kentucky. For years, the Japanese paid electric rates almost double those of U.S. car manufacturers and still beat their pants off.

Let's face it, if the automotive market were truly competitive, without import quotas on Japanese products, American automakers would be belly up.

Jim Lundrigan

New Haven, CT

1. We are currently working on a study measuring the sustainability of prices above regional competitive levels and the resulting profitability of such prices.

2. For example, a recent PMDAM study of the Southeastern region modeled more than 2,000 generators, 3000,000 megawatts of capacity, and all major tie-ins in the region.

3. Traditional tests (e.g., the HHI) measure capacity shares to assess market concentration. Lewis J. Perl suggests measuring output (gigawatt-hours) shares instead, noting that high capacity shares might be attached to higher energy costs. In our view, a combination of capacity, energy, and transmission shares should be used to assess market concentration levels.


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