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Fortnightly Magazine - May 1 1997

Gas-fired Generation: Can Renewable Energy Reduce Fuel Risk?

Michael C. Brower, and Brian Parsons

Some in Congress would link customer choice with a portfolio standard. How would that play in a wholesale power market where gas turbines rule the roost?

By Michael C. Brower and Brian Parsons

WHAT KINDS OF POWER PLANTS WILL

get built in a deregulated electric industry? If recent history offers any guide, utilities and independent power companies will succumb to the traditional wisdom and invest in gas-fired combustion turbines and combined-cycle plants. Sound reasons may exist for doing so. The plants are less expensive than conventional steam plants. They put less capital at risk.

Energy Market Structure Issues Dominate Wisconsin Rate Cases

Phillip S. Cross

In a series of rulings regarding Wisconsin Electric Power Co.,

the Wisconsin Public Service Commission has directed the

utility to reduce electric charges and natural gas service rates.

In a similar ruling, the commission also has authorized Wisconsin Public Service Corp. to boost rates for natural gas, while trimming rates for electric service.

Wisconsin Electric. The commission ordered Wisconsin Electric to cut electric rates by $7.383 million. Rate of return on common equity was set at 10.8 percent.

Frontlines

Bruce W. Radford

If Jane Austen were writing this column, she would begin something like this: "It is a truth university acknowledged, that a natural gas distributor in possession of a good franchise must be in want of an electric utility to merge with."

That's the rule of electric/gas convergence. But as an editor, my instinct when I uncover such a "rule" tell me to look for a reason why it ain't so. That's why I got such a kick from a recent conversation with Sheldon Silver, the speaker of the New York State Assembly.

Ohio Reviews Rules for Electric Aggregation Service

Phillip S. Cross

The Ohio Public Utilities Commission has reaffirmed its approved guidelines for the provision of "Conjunctive Electric Service" by utilities in the state, rejecting arguments by consumer advocates that the plan won't do much for residential customers.

The guidelines, first approved on Christmas Eve last year, had required the utilities to permit customers of all types to aggregate their loads to derive greater energy savings than they could achieve individually. See, Re

Conjunctive Electric Service Guidelines, Case No. 96-4006-COI, Dec. 24, 1996, 174 PUR4th 96, (Ohio P.U.C.).

People

CMS Energy Corp.'s energy marketing unit, CMS Marketing, Services and Trading, hired David B. Geyer as v.p., risk management. Geyer's responsibilities include hedging, arbitrage and trading. CMS Generation Co.'s contract with Thailand's AMATA-EGCO Power Ltd., prompted the promotion of W. David Carni from operations superintendent to operations and maintenance plant manager.

Walter J. Gilbert, Volunteer Energy Corp. v.p., will head the company's newly opened office. Gilbert's added duties include special projects relating to gas acquisition, gas purchasing and marketing.

Ohio Upholds "Fresh Look"Option for Telephone Subscribers

Phillip S. Cross

The Ohio Public Utilities Commission has refused to modify an earlier ruling that required telecommunications local-exchange carriers to permit their special-contract customers to reexamine their negotiated rates to look for cost-saving alternatives once competition is established in the local market.

The Ohio Telecommunications Industry Association had asked the commission to reconsider the so-called "fresh look" provisions, issued Nov.

Joules

Zond Development Corp. will supply MidAmerican Energy Co. with 45 MW of wind-generated power per month for 20 years. Terms of the agreement were not released, but Zond will begin supplying energy within three years of regulatory approval. The contract helps fulfill the utility's alternate energy requirements under Iowa law. Zond will generate the power from about 150 wind turbines planned for Buena Vista County. The windmills will interconnect with the MidAmerican transmission system at a nearby substation.

Gas Utility Gets Burned on the Spot Market

Phillip S. Cross

Motivated by numerous consumer complaints regarding substantial, unexpected increases in bills for natural gas service, the New Mexico Public Utility Commission has fined Public Service Company of New Mexico, finding that the utility knowingly understated gas cost data in prior adjustment clause filings to avoid commission review of an ongoing gas price crisis.

The commission suspended the $2.2-million fine, however, in light of its decision to prevent PSNM from collecting more than $1.5 million in purchased gas revenues associated with the understated gas cost projection.

Moody's Predicts Securitizations Will Win High Ratings

Lori A. Burkhart

Moody's Investors Service has concluded that a properly structured securitization backed by the future cash flow from a utility's stranded investments can achieve a credit rating higher than the rating of the senior debt of the utility.

Moody's said this ability bodes well for the increasing number of investor-owned utilities expected to issue up to $75 billion of such securities by 2000 to recover uneconomic investments.

Off Peak

Robert Blohm and Professor William Hogan recently traded op-ed letters in the Wall Street Journal on the "poolco" and "bilateral" models for wholesale power markets:

Writing first, Blohm (an advisor to Ontario's Macdonald Committee on electric competition) praised bilateral trading (individual buyers and sellers agree on price).

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