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Fortnightly Magazine - October 1 1996

Mailbag

Charles Studness is not the type of person I would like to loan money to. I say this because if interest rates dropped in the future he would believe he was now entitled to borrow at the lower rates and not pay me what was owed.

In his latest diatribe against stranded-cost recovery ("Stranded-cost Recovery: It's Un-American," Financial News, July 15, 1996, p. 43), Studness tells us that recovery of stranded costs will keep Americans from purchasing electricity at the competitive price.

It certainly will; however, first all debts must be paid.

SDG&E to Try Adjustment Clause for Cost of Capital

Phillip S. Cross

The California Public Utilities Commission (CPUC) has approved a proposal by San Diego Gas & Electric Co. (SDG&E) to switch to an automatic adjustment mechanism to determine cost of capital (em a move that could save the utility approximately $100,000 per year in regulatory costs.

Mailbag

Chairman Miller's prediction that consumers and not producers will set future electricity prices is correct, assuming a competitive market. His observation (em that "states that move decisively to a competitive environment and that clear their decks of the debris of electricity companies' stranded costs as quickly as possible will be the winners" (em is equally correct. But estimates of stranded investments range from $20 to $500 billion. Who will pay to clear those "decks"?

Muni Can't Skim Cream in Annexed Area

Phillip S. Cross

The Utah Supreme Court has ruled that a municipal utility must serve all customers in new areas that it takes over by annexation (em not just a select few.

Moreover, the city must compensate the former supplier of utility services for any dedicated facilities, even if it uses its own municipal facilities to serve the new area. However, the city will owe compensation for lost profits only if the municipality fails to obtain the prior consent of the supplier or to pay for the cost of the associated facilities.

Joules

The U.S. Department of Energy (DOE), in a report analyzing the July power outage in

14 Western states, notes that New England is "challenged" by the shutdown of 3,000 Mw of nuclear capacity in Connecticut. The mid-Atlantic will be likewise challenged over the coming years by delay in the construction of a 765,000-volt transmission line between West Virginia and Virginia.

UtiliCorp United amended an electric-supply contract with Public Service Co. of Colorado to reduce electric costs for 78,000 electric customers by as much as $1 million a year.

PUC to Hear Complaint by Customer's Employees

Phillip S. Cross

The Maine Public Utilities Commission (PUC) has agreed to hear a complaint by employees of an industrial customer of Central Maine Power Co. (CMP). The employees allege unfavorable pricing actions against their employer, Yorktowne Paper Mills, including denial of service at the requested voltage. The complaint asks for reparations for prior overcharges.

Maine Drafts Restructuring Plan

Lori A. Burkhart

The Maine Public Utilities Commission (PUC) has released for comment its Draft Plan on Electric Industry Restructuring, which would allow all retail customers to choose their generation supplier beginning in January 2000. The draft permits customers to aggregate, and does not require reciprocity based on retail access in other states or Canada.

Investor-owned utilities (IOUs) would have to structurally separate generation by January 2000, and divest all generation assets by January 2006.

Ohio Won't Bar Resale of Service<

Phillip S. Cross

The Ohio Public Utilities Commission (PUC) has reaffirmed an order issued on May 8 in which it struck down a tariff proposed by Toledo Edison Co. that would have barred resale of service by commercial customers. The PUC rejected allegations by Toledo Edison that the ruling constituted a breach of its duty to regulate electric service to end users. It declined to regulate disputes that it characterized as occurring between landlords and tenants, where the landlord is not operating as a public utility. See, Brooks, et al. v. Toledo Edison Co., Case No.

New Estimates of Nuclear Stranding

Lori A. Burkhart

R.J. Rudden Associates, Inc. (RJRA) estimates U.S. nuclear plant stranded costs at $65.5 billion ($1994) if electric industry restructuring is fully implemented in 1997.

The firm's analysis relied on historic cost and performance data for each facility, and on RJRA projections of regional competitive prices for capacity and energy. RJRA said a slower restructuring would reduce the investment at risk to between $46.3 billion (year 2000) and $23.2 billion (year 2010).

Maine to Examine "Energy-Related" Distribution Services

Phillip S. Cross

The Maine Public Utilities Commission (PUC) has opened a docket to investigate how and to what extent it should regulate "energy-related products and services other than electric service" offered by Central Maine Power Co.

In lieu of price regulation, the utility had proposed setting prices to cover its marginal cost for

specific offerings, including: 1) inspection and maintenance of customer-owned substation facilities, 2) energy control systems and services, 3) construction of customer-owned pole lines, and 4) maintenance and repair of customer-owned lighting equ

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