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Fortnightly Magazine - February 15 1997

Power Pool Politics: How New England Agreed to an ISO

Gordon L. Weil

With its membership opened, NEPOOL sets a transmission tariff, but still must develop competitive markets. In 1993, after a series of attempts going back as far as 1971, the New England Power Pool failed to reach agreement among its members for a regional transmission arrangement. But destiny then took over (em with help from the newly enacted Energy Policy Act (em to lead pool members back to the bargaining table. Finally, on Sept. 30, 1996, NEPOOL announced that its executive committee had agreed in principle on restructuring the pool.

Trends

Kent Knutson and Chris Seiple

Competitive Power Markets

Put Capacity at Risk

Generation markets in the U.S. are about to go through a period of radical transformation as full competition is introduced to the industry. One of the largest impacts of this transformation will be the creation of a more efficient generation industry. According to a new study by Resource Data International, the drive towards increased efficiency will result in the premature shutdown of some high-cost, inefficient power plants.

Our analysis starts by analyzing the costs of every utility owned power plant in the country.

ISO Pricing: Let's Not Socialize Transmission Rates

Mark J. Vople

Flow-based pricing ends

subsidies inherent in grid-wide,

postage-stamp rates.

I

n Order 888, the Federal Energy Regulatory Commission suggested 11 principles for forming an independent system operator, or ISO. In its third principle, the FERC offered this guidance on transmission pricing:

An ISO should provide open access to the transmission system and all services under its control at non-pancaked rates pursuant to a single, unbundled, grid-wide tariff that applies to all eligible users in a non-discriminatory manner.

Perspective

James P. Healy

My business, the natural gas industry, stands at a crossroads. Unbundling and deregulation permeate the market. The next three years will see the end of many fixed, long-term supply and transportation service contracts (em the closing of an era.

In fact, natural gas marks perhaps the last commodity traded on a major exchange that remains captive to such long-term contracts. The demise of such contracts will add flexibility to gas pricing and supply management.

This evolution will accelerate with a host of changes in the way gas moves in wholesale markets.

State Roundup - Electric Competition Moves On

Lori A. Burkhart

Electric Competition Moves On

The recent months have brought a flurry of activity in a number of states:

ARIZONA: The Arizona Corporation Commission approved rules opening Arizona's electric industry to competition over a four-year period starting in 1999. The rules allow retail customers to retain standard electric service, or to choose competitive services.

Beginning Jan. 1, 1999, utilities must make available 20 percent of its peak 1995 demand to all customers, including small business and residential.

Washington Briefs

FERC's New Merger Policy Applied. In the first application of its new merger policy, the Federal Energy Regulatory Commission on Jan. 15 told six Midwestern utilities that they would have to negotiate an agreement to protect ratepayers in order to form a new holding company, Interstate Energy Corp.

FERC also set for hearing limited competitive issues (Docket Nos. EC96-13-000 et al.).

Frontlines

Bruce W. Radford

Did you see Enron's new TV ad when it aired last month during the Super Bowl? What a dud. I had heard about Enron's big pitch (em in fact, I was watching carefully for the ad when, early during the first quarter, here comes this scene of an electric utility power plant control room with a hamster running in place on a wheel inside a cage, trying to reach a bottle of beer standing on a pedestal a few inches away.

Whoa now! Can this be true?

DOE Builds Base for Administration's Restructuring Bill

Joseph F. Schuler, Jr.

To predict the Clinton Administration's next step is foolhardy. And when it comes to the first federal restructuring bill, it's riskier still to rely on drafts that apparently were leaked to gauge reactions of the energy industry and media.

"There have been a gazillion versions of the bill which have been prepared," says a Department of Energy official.

People

Richard Y. Roberts, commissioner of the U.S. Securities and Exchange Commission for five years through July 1995, joined Reid & Priest. He'll work in the business, finance, infrastructure, government, utility and energy segment of the firm.

El Paso Energy International Co., a unit of El Paso Energy Corp., named a six-man management team, pulled from international operations and the recently acquired Tenneco Energy. Byron Kelley will be executive v.p.; John R. Cunningham will be v.p.-administration, engineering and asset management; William S.

In Brief...

Sound bites from state and federal regulators.

Residential Weatherization. Idaho allows Utah Power & Light Co. to discontinue its demand-side management program for residential weatherization, calling it "apparently no longer of much value." to customers. Case No. UPL-E-96-6, Order No. 26747, Dec. 31, 1996 (Idaho P.U.C.).

Real-time Pricing. Montana Power Co.

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