Public Utilities Reports

PUR Guide 2012 Fully Updated Version

Available NOW!
PUR Guide

This comprehensive self-study certification course is designed to teach the novice or pro everything they need to understand and succeed in every phase of the public utilities business.

Order Now

Tennessee Reviews Gas Promotion Costs

Fortnightly Magazine - April 15 1997

will result in breach of contract.

Moody's Investors Service has responded to the PUC order by downgrading the credit ratings of Northeast Utilities, along with subsidiaries PSNH and North Atlantic Energy Corp. The downgrades reflect increased regulatory and financial uncertainty. Moody's said the decision has the potential to create default of Public Service Company of New Hampshire's lending agreements, resulting in a second bankruptcy. While recognizing the company's efforts to deter the PUC's action by filing the lawsuit, Moody's believes that the order itself, despite legal standing, represents a political and regulatory environment that is hostile to bondholders.

(em LB

Stranded Cost Recovery Charges

La Capra Report Wins Commission's Approval

With the 1996 enactment of a state law mandating electric restructuring, the New Hampshire Public Utilities Commission had retained La Capra Associates (a Boston consulting firm) to estimate stranded costs following state law and the commission's own preliminary electric restructuring plan for use in the final plan. The commission further directed La Capra to use those costs to estimate interim stranded cost recovery charges, as required by RSA 374-F:4.

The law had directed the PUC to establish interim stranded cost charges for each utility, to be effective for two years following compliance filings by individual utilities. The state had called on the commission to determine final stranded costs that were "equitable, appropriate and balanced ... [and] in the public interest." In response, the PUC had presented two possible methods of determining stranded cost charges. The first involved a levelized, nonbypassable stranded cost charge, which would be calculated by comparing the projected generation market price over a 10-year period to the book generation cost. The second approach (em which the commission preferred (em compared New Hampshire utility rates against a regional average. The commission eventually adopted the results of the La Capra study, finding it to be "the only study which attempts to project the competitive market price of electricity using NEPOOL's vision of a deregulated generation sector, its products and its pricing rules."

On balance, said the PUC, "[W]e find Mr. La Capra's analysis to be superior to the models offered by PSNH and GSEC [Granite State Electric], which contain approaches that we consider to be reflective of regulated market prices."

The La Capra study used an adjusted regional electricity rate (total retail revenues divided by total kWh sales) to calculate the stranded cost charges for each of New Hampshire's six electric utilities. However, it estimated the figures using 1995 data. The study recommended the charges be updated using 1996 data as soon as available. It also recommended the charges be modified once every six months during the two-year collection period.

According to the La Capra report, the PUC's preliminary restructuring plan had said that utilities with rates at or below the regional average should have a greater opportunity to recover stranded costs than utilities with rates above the regional average. To do this, the La Capra study developed a total average rate target for each New Hampshire electric company, and from that derived a reasonable average rate target of 104.5 percent