You've heard talk lately about the convergence of electricity and natural gas. That idea has grown as commodity markets have matured for gas and emerged for bulk power.
The Indiana Utility Regulatory Commission (URC) has given the Indiana legislature a brief summary report in advance of its final energy report on competition. A new law mandates an annual URC report that analyzes the effects of competition or changes in the energy utility industry on service, and on the pricing of all energy utility services under URC jurisdiction.
The summary report finds that the "agreeable objectives of Orders 888 and 889 can be accomplished without the degree of federal intrusion that is contemplated by those rules." Interestingly, the URC notes that Indiana utilities exhibit "relatively little" stranded-cost concern. Apparently, Northern Indiana Public Service Co. finds its stranded-cost exposure minor. Indianapolis Power & Light takes the position that all utility recovery should be denied because it will delay competition. The report finds most U.S. stranded costs concentrated in the Northeast and California.
On the gas side, the URC concludes that industrial customers received the majority of benefits, residential customers the least (em in some cases, their prices increased.
The URC also criticizes performance-based rate (PBR) design for gas utilities. Although PBR attempts to set prices that reflect efficiencies due to competition, the danger is that utilities may cut costs by reducing maintenance expenses, allowing reliability to suffer. The URC points to other states where pervasive complaints against the telephone industry have led commissions to retract or substantially modify PBR for such companies. (em LB
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