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

Fortnightly Magazine - February 15 1997

by many parties, including MaineÆs largest utilities: Central Maine Power Co., Bangor Hydro-Electric Co. and Maine Public Service Co.

The Democratic influence could be seen with more attention paid to consumers and the environment.

The Joint Standing Committee on Utilities and Energy planned to review PUC recommendations at workshops and other venues after the Jan. 7 start of the legislative session.

ôMy expectation is that we wouldnÆt complete our work until sometime in May,ö says Sen. John J. Cleveland, the ranking Democratic committee member.

That leaves just a month before the end of the session. But Cleveland is confident: ôI expect there will be legislation implemented in æ97. Introduced and passed.ö

According to PUC and legislative sources, broad policy issues have found consensus, mostly because the commission tackled the larger questions in its draft plan issued July 19, 1996. Stranded costs, for example, usually contentious, are not as contentiousùor so say those involved.

In the commissionÆs draft, thereÆs an opportunity, not a guarantee, for stranded-cost recovery, a chance similar to what would occur under traditional regulation. Most sides, in their comments, donÆt object to that solution, says the commission attorney.

The plan allows utilities a ôreasonable opportunityö to recover stranded generation investments before March 1995. Stranded-investment assessments would be made by 2000 and collected by 2006 when full unbundling occurs.

Related to stranded costs, Central Maine Power proposed legislation that would include a securitization scheme, similar to CaliforniaÆs and PennsylvaniaÆs, which would guarantee stranded-cost recovery so that utilities would have ôlegislative collateralö to obtain loans. It is likely to be part of the legislatureÆs restructuring debate.

The Draft Plan for Electric Industry Restructuring (Docket 95-462) would introduce customer choice and retail competition by January 2000. Customers could aggregate. Utilities would have to transfer rights to market output of their contracts with independent power producers that are qualifying facilities, or ôQFsö. Legal obligations under such contracts wouldnÆt be affected. (This issue has generated utility opposition.)

All end users would have access to competitive suppliers, but transmission and distribution companies would be required to have a ôstandard offerö available to end users who donÆt wish to participate.

The PUC also endorsed a New England-wide independent system operator and the evolution of the New England Power Pool into a voluntary power exchange.

Where problems in drafting legislation might arise, according to sources:

• Timing. The draft proposes 2000 as the rollout year. Some legislators are pushing for an earlier date.

• Divestiture. The three major utilities may be split on this issue, as Central Maine is the only utility that owns a fair amount of generation. Also, divestiture of generating assets seems to be an issue when it comes to the ability of transmission and distribution, ôT&D,ö utility affiliates to be in the retail marketing business.

• QFs. Who pays for these contracts? Do they remain with the T&D utility or are they transferred to an unregulated generating company?

• Environmental safeguards. Because of clean air issues with coal plants in the mid-West sending airborne pollutants east, Maine could consider a moratorium on buying power from these plants.

Cleveland