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Fortnightly Magazine - May 15 1997

Pricing Off the Tariff: How to Figure the Maximum Supportable Electric Rate Discount

James C. Cater

A simple formula method shows utilities exactly how much to discount prices. Electric utilities have drawn attention recently (and criticism from some quarters) for granting off-the-tariff discounts to customers deemed at risk for migration to lower-priced competitive alternatives. Typically, utilities have offered discounts to high-load customers in exchange for a long-term purchase commitment providing either more certain earnings, higher expected earnings, or both.


Daniel H. Israel

With the end of monopoly in electric generation, utilities can assure savings by taking a creative approach to state and local taxation.

Deregulation of electric generation will force electric utilities to examine closely their state and local tax burden. Under deregulation, most state and local taxes will not be part of a reimbursable rate structure. Rather, such costs will directly influence bottom-line profitability.

Local property taxes take a big bite out of electric generation profits. Coal suppliers of utilities pay significant local taxes.

Federal Judge Hears Antitrust Complaints on Heat Pump Promotions

Phillip S. Cross

A U.S. federal district judge in Pennsylvania will allow a jury to hear antitrust complaints lodged by heating oil dealers challenging certain promotional activities by Pennsylvania Power and Light Co., but it will exclude from jury deliberations any consideration of whether PP&L had established a "monopoly" in the home heating market.

During the period the utility had allegedly engaged in the promotional activities, its share of the entire home heating market had never exceeded 31 percent, the court said.


Bruce W. Radford

When the phone rang it was Tom Mathews, director of mechanical and energy services at Hannaford Bros., the grocery chain that has become better known for shaving utility bills than trimming pork chops.

Mathews made news two years ago when Hannaford had threatened to install generating plants on site at some or all of its 140 or so retail stores, clustered in New England and the north and southeast states. Now he was calling to tell me about his new plan.

Financial News

Stephen Maloney

S&Ls won damages when the feds reneged on promises. Utilities could do the same.

It's tough to be a utility CFO these days. For decades, electric utilities have served both as target and conscripted agent of government policy. Utilities pay disproportionately high taxes. Utility rate structures further distort market forces with subsidies flowing from business to residential. These policies actually defeat market forces. To large measure, many of these market failures arise from reconciling the hangover from uneconomic policy initiatives.

Off Peak

Many regulators say that new technology makes it cheaper and easier to build and operate electric generating plants.

GE Faults Editorial License

T.F. Garrity

I am writing to express my concern over the Feb. 1 publication of the article, "Why Applicants Should Use Computer Simulation Models to Comply With FERC's New Merger Policy" (p. 22). The authors, Mark W. Frankena and John R. Morris, have used the editorial pages of PUBLIC UTILITIES FORTNIGHTLY to deliver a highly commercial message promoting their preferred computer model at the expense of several other software packages, which they specifically name.

Bumpeers Weighs in on Electric Restructuring

Lori A. Burkhart

Favoring a uniform federal mandate, but also a drawn-out transition period to let the industry "prepare" itself, Sen. Dale Bumpers (D-Ark.) has recently introduced federal legislation on electric industry restructuring with the admonition that new laws should assure benefits to residential consumers (em not just the large-load customers.

Bumpers, ranking Democrat, Senate Committee on Energy and Natural Resources, on April 7 addressed the American Gas Association's Natural Gas Roundtable in Washington, D.C., on electric restructuring, talking about his introduction of S.

Real-Time Pricing: Chinks in the Armor

Jim Lundrigan

Regarding the Hanser, Wharton and Fox-Penner article on real-time pricing ("Real-Time Pricing (em Restructuring's Big Bang," PUBLIC UTILITIES FORTNIGHTLY, March 1, 1997, p. 22), the authors state that RTP programs will defer capacity needs and reduce peak loads. I doubt it. People don't mind paying high prices per kWh for a few hours each year. On the other hand, there is nothing like an old-fashion ratchet to get people to reduce their peak demand.

ISO/PX Plan Goes to FERC; BPA Unhappy

Lori A. Burkhart

California's three largest investor-owned electric utilities have submitted their proposals to the Federal Energy Regulatory Commission for implementing an independent system operator and power exchange for the state's restructured electric industry (Docket Nos. EC96-19-001 and ER96-1663-001).

Last November, the FERC had conditionally approved an "acceptable framework" submitted by Pacific Gas & Electric Co., San Diego Gas & Electric Co., and Southern California Edison (the trustee for the ISO and PX is S.