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Fortnightly Magazine - March 1 1997

New York Finalizes ISO Proposal

Lori A. Burkhart

New York Power Authority trustees have approved agreements to help it establish an independent system operator for the statewide electric transmission system, which could be partially implemented in 1997, and fully implemented by mid-1998, if approved by the Federal Energy Regulatory Commission.

Members of the New York Power Pool, the authority and the state's seven investor-owned utilities have worked for nearly two years to develop a proposal for an independent system operator, or ISO. The proposal and associated tariffs were submitted to the FERC.

City of Alma Asks for FERC's Help in CE Dispute

Lori A. Burkhart

The City of Alma, Mich., has asked the Federal Energy Regulatory Commission to consider whether Consumers Energy is entitled to recover stranded costs from customers in the municipality that switches from CE's system to a municipal electric system if the city creates one.

A consultant hired by Alma already has determined the city could own and operate a municipal utility, which would result in cost savings in excess of 20 percent. The savings estimate has been challenged by CE, formerly Consumers Power Co., because the analysis does not contain a stranded-cost payment.

Pennsylvania Issues Pilot Guidelines

Lori A. Burkhart

The Pennsylvania Public Utilities Commission has approved final guidelines for electric utility pilot programs for Pennsylvania's transition to a competitive retail electric generating market. The pilots will allow a limited number of residential, commercial and industrial customers to choose their electric suppliers.

The "Electricity Generation Customer Choice and Competition Act," signed into law by Gov. Tom Ridge Dec. 3, 1996, requires participation in the pilots by customers representing 5 percent of a utility's peak load for each customer class.

Financial News

Charles M. Studness

You've got to reinvest the proceeds (em and not just anywhere.

Recovering stranded investment is sometimes equated to preserving shareholder wealth. In fact, full recovery of stranded investment by itself will not preserve shareholder wealth in most cases.

What is missing all too often in discussions of stranded investment is the role that capital investment plays in the creation of shareholder wealth.

Oregon PUC Staff Wants M&A Conditions

Lori A. Burkhart

The Oregon Public Utilities Commission staff has recommended the proposed merger of Portland General Electric Co. and Enron Corp. be approved with conditions, and has asked for a customer-rate reduction of $47.4 million for four years.

Subsequently, an $11.2-million rate-reduction component would remain part of electric rates until PGE's next rate proceeding. The staff would include a feature to true up rate-reduction amounts if certain future revenues exceed expectations.

In Brief...

Sound bites from state and federal regulators.

Electric Briefs

Environmental Review. California halts work on report of environmental impacts of electric restructuring and new market structure, finding no need for independent review of commission proposals after state Legislature had sanctioned "a more competitive scheme" last summer when it passed Assembly Bill 1890. R.94-04-031, I.94-04-032, Decision 96-12-075, Dec. 12, 1996 (Cal.P.U.C.).

Electric Restructuring.

Rate Proposal Disappoints Texas Utility

Lori A. Burkhart

Central and South West Corp. President and CEO Dick Brooks is "extremely disappointed" with a proposed decision by an administrative law judge to increase annual revenues of its subsidiary, Central Power and Light Co., by $7.2 million. CPL in November 1995 had asked for a $71-million hike in retail rates.

A significant factor contributing to the difference is that the judge recommends reducing return on equity from 12.25 percent to 10.9 percent, which would reduce the rate increase by $30 million.

Alabama Finds Need for Power, Certifies Cogen Plant

Phillip S. Cross

Finding that Alabama Power Co. has a clear need for additional capacity in the near future (em reserves for the year 1999 will drop to approximately 9.2 percent (em the Alabama Public Service Commission has authorized the utility to pursue a utility-owned cogeneration project as the least-cost resource option.

The company plans to install a natural gas-fired cogeneration plant at an industrial facility owned by one of its larger customers. The utility will own, design, maintain and operate the

100-MW facility.

Kewaunee Nuclear Plant Is In Trouble

Lori A. Burkhart

Due to troubles at the Kewaunee nuclear power plant, the Wisconsin Public Service Commission has agreed to allow its three utility owners to accelerate depreciation based on a plant retirement in 2002 instead of 2013. It also agreed to shorten the length of time decommissioning funds can be set aside.

The plant had shut down Sept. 20, 1996, for routine repairs and was expected to open one month later when damage to steam generators was found to be greater than expected. Replacing them would cost about $100 million.

DSM Program Victim of Market Reforms

Phillip S. Cross

The Idaho Public Utilities Commission has allowed Idaho Power Co. to terminate an "industrial efficiency" conservation program designed to promote the installation of energy efficient equipment by both industrial and large commercial users through the use of grants awarded by the utility.

The commission found that the way to implement such goals is changing in light of electric industry restructuring, while declaring its continuing support for utility investment in conservation and renewable-based resources.