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It's a War Out There: A Gas Man Questions Electric "Efficiency".

Fortnightly Magazine - December 1996

gas utilities from further civil recourse.

Mitigating Stranded Investment: Electric Marketing Through the Back Door

The FERC's electric utility restructuring "mega-NOPR" includes a nebulous expectation that electric utilities mitigate potential "stranded investments" through "marketing."24 According to John Anderson of the Electricity Consumers Resource Council (ELCON), FERC Order 888 "permits utilities to recover 100 percent of their uneconomic costs."25 These costs will be recovered through "exit fees" that can include far more than what was traditionally considered in calculating avoided costs (i.e., DSM, IRP, or deriving power purchases from cogeneration "qualifying facilities"). In addition to DSM/IRP investments, "exit fees" can include charges for nuclear decommissioning, retirement plans, and a virtually endless stream of other "prudent expenses."

The economic magnitude of exit fees can easily thwart competition (em either on the supply-side

of alternative electric service providers or on the demand-side as an alternative to electricity. While the concept of exit fees was envisioned to address situations in which an electrical consumer desires to switch electrical suppliers, thus "stranding" a "good faith" investment in the initial generating capacity, the concept has also been used by electric utilities to stifle competition by dissuading consumers from using nonelectric end-use alternatives and/or cogeneration A case in point is that of the ill-fated cogeneration project at the Massachusetts Institute of Technology. In theory, at least, such manipulative practices could be extended to preclude consumers from replacing any electrically powered appliance in favor of any end-use alternative fueled by natural gas.

The EPAct Mandates: A Few Workshops, but No Follow-through

The 1992 Federal Energy Policy Act26 (EPAct) presented a mixed bag for the electric utility industry. It clearly advocated that energy conservation should be at least as profitable as load-building,27 and it introduced the potential for new competitors in the form of "exempt wholesale generators" (EWGs).28 Without actually using the terminology of "environmental externalities," certain passages within this law (em namely, Title XVI (em also called for evaluating "all costs of production, transportation, distribution, and utilization" of energy.29 Assuming that the key word is all, this is no minor consideration given the growing understanding of the environmental impacts of energy production.30 However, relatively little if any progress has been made in this particular area of the EPAct.

Another EPAct requirement for electric utilities only calls for a joint report from the DOE and the Federal Trade Commission to the

President and Congress by October 24, 1994, that analyzes "whether any unfair, deceptive, or predatory acts exist, or are likely to exist, from implementation of such [electric utility IRP] programs."31 This study was published March 1995 by DOE's Office of Utility Technologies (OUT), as chapter 6 of a larger report. This chapter, entitled "Small Business Impacts," essentially limited its anticompetitive issues and discussion to the long-term animosities that exist between independent HVAC contractors and some utilities that have traditionally sold and serviced HVAC equipment.32 Virtually nothing was discussed about the anticompetitive effects of widespread "electrotechnology" promotional efforts under the guise of IRP, in spite of the fact that natural gas and propane trade organizations (which are almost all small businesses)