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Fortnightly Magazine - February 15 1997

service. Setting up unregulated subsidiaries as joint ventures with qualified partners can create a dynamic organization capable of adding real value. This virtual corporation will provide a range of energy industry products and services to customers on a one-contract, customized basis.

Several good examples highlight utilities already making such bold moves.

In Wisconsin, "Custometrics" was formed as an information-system services company through a joint venture with an experienced service provider. This new entity serves its affiliate, Wisconsin Gas. It sells services to other companies.

In New York, Niagara Mohawk moved to spin off its gas supply and power sales to an existing independent marketing affiliate. It has, however, been confronted by regulatory constraints. The New York Public Service Commission's code of conduct disallows its plan to execute business transactions among affiliates. Only tariffed (regulated) services may be bought and sold between regulated company affiliates. This example illustrates excessive regulatory concern over unregulated affiliates.

In Indiana, where legislation has allows regulated companies to file alternative regulatory plans (ARP), there's also a spinoff of supply functions. Proliance Energy, for example, was formed as a joint venture between Indiana Gas and Citizens Gas & Coke. Proliance will assume responsibility for gas supply portfolios, and sell to other companies.

Northern Indiana Public Service started negotiating its ARP filing before submitting it. This process is more likely to produce a pro-consumer, flexible program with consensus than the traditional adversarial regulatory proceeding.

In Massachusetts, Boston Gas filed to exit the merchant function by transferring gas supply assets to an affiliate marketing company, AllEnergy Marketing Co. Inc. Later, AllEnergy announced plans to merge with NEES Energy Inc., a marketing affiliate of New England Electric System, an electric utility operating in its franchise area.

Boston Edison and Williams Companies have also established a joint-venture marketing company to serve New England energy markets.

The lengthy regulatory process (em even in states where progressive support for transition to

competition (em demonstrates that proponents will continue to tout regulation, especially to influence the activities of these new competitive affiliates. They will push for "regulated competition" (em that is, the rules, regulations, and rate conditions traditionally imposed on the monopoly business.

Nonetheless, the best hope for all stakeholders still lies in a network of independent or interdependent affiliates (em separate profit centers designed to complement the regulated electric or natural gas distribution company, providing a full range of products and services on a "one-contact, one-contract" basis.

And after all, from the customer's perspective, the ability to choose and buy at the lowest cost will always make for an attractive combination. t

James P. Healy is vice president of energy services planning for The Southern Connecticut Gas Co., a subsidiary of Connecticut Energy Corp. Other CE subsidiaries include CNE Energy Services Group, Inc. (providing energy commodities and services to commercial and industrial customers), CNE Development Corp. (part of a gas purchasing cooperative), and CNE Venture Tech, Inc. (providing information technology to utility companies).


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