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Legislative Hot Spots: From Texas to Ohio, New Jersey to Minnesota, Electric Restructuring Games Begin

Fortnightly Magazine - February 15 1997

in which end users could shop for electricity, although shopping was limitedùand controversialùin this pilot.

The ICREC calls for pilot programs, then a phase-in of direct access, with the largest customers served first. Access charges would be assessed to customers choosing other-than-utility providers, as would transition charges in the first five years. Charges would provide 100-percent recovery of transition costs. The ICREC also calls for regulatory streamlining so utilities can prepare for competition, perhaps unbundling or selling assets. Other provisions: A universal service fund, and profit-sharing if a utilityÆs rate-of-return exceeds a specified level.

Looking at the three groupsÆ spread of opinion, it is no wonder the Joint Committee was struck dumb after 18 months.

Mahar says it is unlikely utilities will see full recovery of stranded costs and is more likely that consumers will share in the benefits of deregulation. Illinois legislators understand companies must succeed to employ residents, pay taxes and benefit shareholders. ôBut we canÆt guarantee that success,ö Mahar says.

Independent system operators and power pools are unlikely to be addressed in legislation. ôWeÆre not going to focus on all the grand-scale things that you may see coming out of California,ö Mahar says. ôWe donÆt use them as an icon in Illinois.ö

The Legislature looks prone to seeing that the free market is just thatùfree. The transition will happen with ôas little strangleö from the government as possible. If utilities want to unbundle, it appears it will be up to them.

Mahar says it is difficult to predict how tax issues will be addressed. (Generating plants could have less value in a restructured industry.) Illinois wants its utilities to be able to compete with other states.

Throughout the debate, Mahar says, the state body will work in a climate where 95 percent of the public, Legislature and media know nothing about the issue.

Rep. Vince Persico (R), Joint Committee co-chair, expects to reintroduce a restructuring bill this session. After that, there is no predicting who else may get into the act. Chicago Mayor Richard M. Daley, for instance, has requested a copy of a model bill put out by the American Legislative Exchange Council.


Following In CaliforniaÆs Footsteps?

Massachusetts became the fourth state last year to launch a retail-wheeling pilot, and its fight for full restructuring promises to be as historic, with eight investor-owned and 40 municipal utilities vying to be heard.

As in other states, various agencies were penning restructuring reports. By the end of last year, two detailed plans had been released. The state attorney generalÆs strategy was consistent with a Department of Public Utilities draft issued earlier.

In the attorney generalÆs plan, full retail wheeling for all customers would begin by Jan. 1, 1998. Stranded costs would be recovered over 12 years, with a 2.8-cent-per-kilowatt-hour access charge tacked on in the first three years. Residential customers are guaranteed a 10-percent rate reduction.

ôConsumers Firstö was endorsed by New England Electric System, whose Massachusetts Electric Co. would recover stranded costs through the access charge. NEES is perhaps better structured to handle divestiture than the stateÆs other