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Fortnightly Magazine - December 1996

Diversification, Round Two: Telecom Act Has Electrics at it Again.

Joseph F. Schuler, Jr.

Once burned, but twice eager, utilities reprise their 1980s-era strategy, this time in the telephone business.

"It's not like they're going to open a pharmacy. It is directly related in some way, or at least arguably."

Earlier this year, 15 utilities grabbed the brass ring: a full-blown chance to enter the telecom business.

FERC Changes Policy in First Negotiated Gas Rate Order

Lori A. Burkhart

The Federal Energy Regulatory Commission (FERC) has announced two policy changes in its first final order on negotiated rates under its policy statement on Alternatives to Traditional Cost-of-Service Ratemaking. The FERC will now require pipelines to file either negotiated rate contracts or tariff sheets that reflect the essential elements of their negotiated rate agreements. In addition, pipelines will no longer be permitted discounted adjustments to their recourse rates.

The case involved NorAm Gas Transmission Co. (Docket No. RP96-200-001).

Off Peak

Stranded Costs Projected at -$2.9B to $22B

The Texas Public Utility Commission (PUC) was scheduled this month to consider estimates of retail competition's impact on electric utilities.

A draft staff report, yet to be reviewed by the PUC, estimates stranded costs that span a high of $22 billion to a low of negative $2.9 billion.

Breaking the Voice Barrier: Does Dial Tone Mix with Kilowatt-Hours?Sim Hall

Sim Hall

What electrics should know about consumer

preference before diving into telecommunications.Electric utilities would enjoy a strong measure of credibility with consumers should they decide to enter the telephone business.

That finding comes from a recent nationwide survey of more than 1,000 households, drawn from counties with a population of at least 85,000 (see box for details).

Financial News

Annual Annual EPS

Close Close Percent 52-Wk 52-Wk Div Div Book P/E Last

Company Region 06/28/96 09/30/96 Change High Low Rate Yield Value Ratio 12 Mos.Electric Utilities

AEP Company Inc. Midwest 42.63 40.63 -4.69 44.75 35.13 2.40 5.91 22.68 13 3.10

Unicom Corp.

Wooing Wall Street: Choosing Between a Spinoff or Targeted Stock for that New Unregulated Subsidiary.Richard H. Pettway and Judith Johnson

Richard H. Pettway, and Judith Johnson

AT&T and U S WEST scored points with investors, but PacTel's AirTouch deal failed to move the market.ell before the Telecommunications Act of 1996 was signed, it had become abundantly clear to telephone companies that they would need to change their organizational or corporate structures to keep pace with the changing business and regulatory climate.

The question, however, was how to make that structural change pay off on Wall Street (em how to use the reorganizati

In Brief...

Sound bites from state and federal regulators.

Storm Damage Costs. Hawaii rejects proposal by electric utility for statewide surcharge to recover hurricane damage costs. Says that "regulatory compact" requires utility to quickly repair damage and restore service to consumers in return for recovery of all prudently incurred costs. Dkt. No. 94-0097, Aug. 7, 1996.

Gas-supply Incentives. Missouri increases LDC's rates by $9.5 million.

Utilities Shut Out of Third-quarter Stock Upswing

Utilities Shut Out of Third-quarter Stock Upswing

Utility stocks treaded water during the third quarter, while most stocks nationally took flight. This lackluster quarterly performance in the utilities sector proved most prevalent in the Public Utilities Stock Index. The box score: Our index fell 43.96 points, or 1.11 percent, to conclude the three-month period at 3908.43.

In stark contrast, the Dow Jones Industrial Average powered itself 227.54 points higher, or 4.02 percent, en route to a record high of 5882.17.

N.H. Announces Restructuring Proposal

Phillip S. Cross

As directed by the state legislature, the New Hampshire Public Utilities Commission (PUC) has issued a preliminary plan to restructure the state's electric industry.

Frontlines

Bruce W. Radford

It was the week before Thanksgiving. On the train ride home (I live in downtown Washington, DC, in an old, sprawling apartment building that once claimed Huey Long and Richard Nixon as tenants), my attention was drawn to a frazzled female lawyer sitting in the seat next to me, who was feverishly making notes in the margins of a thick, serious-looking, legal-sized document.

I confess. I like to read over people's shoulders, but often lose interest after the first few words. This case was different, though.

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