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Fortnightly Magazine - March 1 1997

Seven Myths of Real-Time Pricing

Albert L. Danielsen & Nainish K. Gupta

Myth 1. RTP increases the utility's costs and revenue requirements. %n1%n

Reality 1. A well-conceived RTP program reduces the utility's costs and revenue requirements.

RTP programs can reduce peak demands for power, increase off-peak demands, and reduce the need for additional peak-load capacity. This increase in efficiency can lead both to higher company profits and greater customer savings. As the electric industry becomes more competitive, these savings will flow to those customers most responsible for lowering the utility's costs.

Perspective

Alexander J. Black

Prospects look good for cheaper, independent electrical power in Ontario. The market is forcing an end to the current impasse on energy policy. Reforms are apt to include "wholesale access," which should arrive in the province before the year is out. Otherwise, Ontario may lose jobs to neighboring provinces and states.

Competition Moves N.Y. To Protect Core Gas Supply

Phillip S. Cross

Concerned that competition in the natural gas market might affect reliability of gas supply for core customers, the New York Public Service Commission has adopted new short-term curtailment procedures for the states natural gas local distribution companies.

According to the commission, the new procedures "recognize the restructured natural gas industry," and require that in the event of short-term interruptions or force majeure curtailment situations, the needs of core customers are met first.

Real-Time Pricing - Supplanted by Price-Risk Derivatives?

Mike O'Sheasy

RTP assumes that price spikes will deter load. But how will customers behave if they've hedged against that risk?

Tomorrow's electricity industry promises a wealth of pricing options as wholesale generation becomes more like a commodity. Spot pricing marks one example. And with spot markets will come a greater need for price derivatives (em hedge contracts that will permit customers to trade or shed risk to achieve a higher degree of price certainty.

Washington Briefs

FERC Gives Guidance To Foreign Affiliates. The Federal Energy Regulatory Commission on Jan. 15 denied a petition by British Columbia Power Exchange Corp. (Powerex), the power marketing affiliate of British Columbia Hydro and Canada-utility Power Authority (BC Hydro) to sell power at market-based rates.

The order marked the first time the FERC showed how it will apply Order 888's open-access requirements to foreign utility affiliates (Docket No. ER97-556-000).

"I look forward to Powerex taking another run at this issue," says Commissioner James Hoecker.

N.Y. Court Upholds PSC's Electric Restructuring Plan

Phillip S. Cross

A New York supreme court (Albany county) has affirmed a May 1996 order by state public service commission to restructure the state's electric utility industry, upholding PSC's "flexible retail poolco" model and authority to direct utilities to file plans for further review.

The court ruled that the PSC may deregulate generation and compel separation of generation, wires, and energy marketing functions. Moreover, the PSC need not guarantee 100-percent recovery of stranded costs, says court, but may "encourage" utilities to divest themselves of generating assets.

Electric vs. Gas

Bruce B. Lindsay

I was amused and concerned by the allegations of marketing warfare that Mr. Krebs felt compelled to address in his December 1996 article.

Dodging Suits and Pols, DOE Digs In on Nuclear Waste

Joseph F. Schuler, Jr.

Chair Murkowski Chews Out an Undersecretary. At a Senate panel on a bill calling for the Department of Energy to store nuclear waste short-term, opponents stacked up objections, even renewing opposition to a permanent site.

The "Nuclear Waste Policy Act," S. 104, is similar to a bill passed in the Senate last year. It calls for

construction of temporary storage, a safe way to transport the waste, and more studies leading to a permanent site 1,200 feet below the ground at Yucca Mountain, Nevada. Already, $6 billion has helped bore an exploratory tunnel there.

Off Peak

A control area is like an airport (em too many planes, not enough runways.

SAN FRANCISCO, CALIFORNIA, AUGUST 21, 1996 - 8:35 A.M.

On Saturday, Aug. 10, 1996, a power outage left more than 4 million Californians without electricity, prompting the California Public Utilities Commission to conduct emergency hearings. Witnesses appeared from electric utilities and a host of federal and state agencies, including the Bonneville Power Administration, the U.S. Department of Energy, the Federal Energy Regulatory Commission and the Western Systems Coordinating Council.

Frontlines

Bruce W. Radford

One of these days you may see a former chairman of the American Gas Association become the new chair of the Edison Electric Institute. Or maybe the other way around.

I broached this subject the other day when I found myself downtown at EEI headquarters on Pennsylvania Avenue, talking with some association reps.

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