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Fortnightly Magazine - February 15 1997

N.J. Municipal Water System Acquired

Lori A. Burkhart

New Jersey-American Water Co., the largest water utility in New Jersey, has acquired the Howell Township Municipal Water System for $35.1 million, in what NJAW believes to be the largest private acquisition of a municipal water system in the U.S.

NJAW President Daniel L. Kelleher noted that Howell Township residents would experience an immediate 5-percent water rate cut, and rate stability.

Transfer of utility ownership also benefits municipalities, Kelleher says, by turning hidden equity into capital to use for community needs.

Pennsylvania Finalizes Regs for Small Water Utilities

Phillip S. Cross

With doubts resolved over its legal authority, the Pennsylvania Public Utility Commission has issued "final-form" rules (but subject to legislative review) that allow an "operating-ratio" method as an alternate form of rate regulation for small water and wastewater utilities, many of which now face severe financial difficulties.

For added financial aid, the new rules also allow water utilities to create an emergency maintenance and operation fund as well as a reserve account, with both funded as "customer contributions in aid of construction."

Revenues Eaten Up.

Electric Acquires Water Utility

Lori A. Burkhart

NIPSCO has agreed

to acquire IWC Resources Corp., the parent of Indianapolis Water Co., for $288 million, prompting a look at credit ratings.

In response to the agreement, Moody's Investors Service is considering a ratings downgrade of IWC ('A1' senior secured). Moody's also confirmed the ratings of NIPSCO Industries, Inc. ('baa3' preferred stock) and its operating subsidiary, Northern Indiana Public Service Co. ('A2' senior secured).

New York Court Rejects EMF Claims

Phillip S. Cross

A New York appellate court has rejected claims by sellers of a residential property located near a high-voltage transmission line in Westchester county that the utility owner of the line should pay compensation for a drop in property value allegedly due to public fears about electromagnetic fields.

The case turned on the court's interpretation of constitutional "taking" rules and the legal doctrine of "inverse condemnation.

"Invasion" Claimed. The sellers had sued Consolidated Edison Co.

Enron Buys Wind Power Developer

Lori A. Burkhart

Enron Corp. has purchased wind-power developer and manufacturer, Zond Corp. of Tehachapi, Calif., and plans to form a new business unit, the Enron Renewable Energy Corp., which will be responsible for developing renewable energy sources for Enron.

"Renewable energy will capture a significant share of the world energy market over the next 20 years, and Enron intends to be a leader in this very important market," says Kenneth Lay, Enron Chairman and CEO. According to predictions by the American Wind Energy Association, global wind capacity should reach 23,500 MW by 2005. (em LB

N.C. Suspends Long-term Avoided-cost Rates

Phillip S. Cross

The North Carolina Utilities Commission has permitted the state's major investor-owned electric utilities to suspend their

existing avoided-cost rate offers for long-term power purchases from qualifying cogeneration facilities, pending regulatory review.

The commission said it would also review a proposal by North Carolina Power Co. to reduce the eligibility threshold for the avoided-cost rates from the current capacity level of 5,000 kilowatts, to only 100 kW.

Consumers Would Overpay.

Coalition Targets RUS Loans, Coal

Joseph F. Schuler, Jr.

A coalition of congressmen and private-interest groups has put the Rural Utilities Service on its hit list, aiming to save taxpayers about $11.5 billion over five years.

Dubbed "Stop Corporate Welfare," the coalition has targeted 12 programs. The RUS is first on the roster.

The coalition group notes that the RUS subsidizes loans for electric cooperatives, which serve 10 percent of the population. The group also says that loans to co-ops are made at interest rates not only below the Treasury's borrowing costs but well below that of investor-owned utilities.

Off Peak

Simon Allen

Liberalisation of the electricity markets in the UK and Scandinavia has driven merger activity in these territories. This was evident in 1996 with U.S. companies taking over MEB, East Midlands Electricity and Northern Electric, with London Electricity likely to follow in early 1997.

Ohio Gas Pilot Offered To 170,000

Lori A. Burkhart

The Ohio Public Utilities Commission has approved Columbia Gas of Ohio's "Customer Choice" program, which allows customers to purchase natural gas from other suppliers starting in April (Case No. 96-1113-GA-ATA).

About 170,000 customers in the Toledo area will be eligible to participate, making it one of the largest pilot programs in the nation. The utility anticipates that the program eventually will be available to all of its customers.

Anti-Competitive Impacts of Secret Strategic Pricing in the Electricity Industry

William G. Shepherd

Flexible prices make markets hum,

but discounts discriminate when monopolies rule.

Many expect that the electricity industry is moving inexorably toward a much-publicized "new competitive era." Companies, regulatory officials and experts all regard the momentum as powerful.

So far, the changes are just beginning, and there is a long way to go to reach fully effective competition. %n1%n Yet even at this early stage, the merger and pricing strategies adopted by the established electric firms may be threatening the prospects for competition.

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