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Fortnightly Magazine - June 1 1997

Duff & Phelps Notes Aggregator's Role in Securitization

Lori A. Burkhart

Duff & Phelps Credit Rating Co. has released a report advising that a properly structured plan for securitization of stranded utility investment should address third-party credit risk.

Off Peak

Can utilities learn to deliver?

Selling electricity is not like selling a pair of sneakers. Electricity is a product consumers can neither see, feel nor smell. Try it on? Go for a test drive? Not hardly. So how does an electric utility make its product appealing to consumers?

Some say it all comes down to price. A penny saved is a penny earned. But what about tenths of a penny? Do consumers know or even care what they pay for a kilowatt-hour? Just keeping the lights on seems enough for most.

Anticipating the opening of the retail electricity market, MidAmerican Energy Co.

ALJ Refuses PECO's Stranded Cost Recovery

Lori A. Burkhart

Pennsylvania Administrative Law Judge Louis Cocheres has recommended that the Public Utility Commission should deny a request by PECO Energy Co. to recover stranded costs from ratepayers through a surcharge over 10 years.

Pennsylvania State Sen. Vincent Fumo (D) had intervened in the proceeding against PECO's request. Fumo claims the ruling is significant because it points out that customers should not receive the financial benefits of deregulation if PECO is allowed to impose the surcharge.

"Although the final decision is still in the hands of the commission ...

Texas Merger May Prove Expensive

Lori A. Burkhart

A Texas court has issued an interim order in the dispute between Central and South West Corp. and El Paso Electric Co. over their failed merger, ruling that Central and South West must pay El Paso a $25-million termination fee.

The proposed merger had been announced in 1993 and was terminated in 1995. Both companies had sued each other in a consolidated proceeding.

Chief Judge Larry Kelly of the U.S. Bankruptcy Court of the Western District also ruled that Central and South West may owe El Paso "interest-carry" costs alleged by El Paso at $18 million.

Minn. PUC Delays Primergy Vote

Lori A. Burkhart

The Minnesota Public Utilities Commission has said it will postpone a decision for two months on whether to approve the proposed merger of Northern States Power Co. and Wisconsin Energy Corp. to form "Primergy."

The PUC may not decide the matter until as late as August. A sunset clause kicks in just three months after that time, which would allow the utilities to back out of the deal.

Illinois High Court to Hear Tax Case

Lori A. Burkhart

The Illinois Supreme Court has agreed to hear an appeal filed by Ogle County tax authorities regarding the valuation of Commonwealth Edison's Byron nuclear plant for the tax years 1989-1992, and whether certain plant assets were taxable as real property or exempt as personal property.

The appeal concerns a December 1996 ruling by an Illinois appeals court that effectively changed an assessment from real to personal property.

Major Coal Study Released

Lori A. Burkhart

The National Coal Council has released the findings of a major new study on coal prepared at the request of former DOE Secretary Hazel O'Leary, which found that while the generation of electricity from coal has increased, emission of pollutants from coal has decreased.

A similar report was released in April, conducted by Mills-McCarthy & Associates, and sponsored by the Western Fuels Association, Inc., the National Mining Association, and the Center for Energy and Economic Development.

"Virtual Utility" Aims for Savings

Lori A. Burkhart

Strategic Energy Ltd. has premiered a "Virtual Utility," allowing electric consumers to shop nationwide for the best-priced power. Strategic Energy's control center will allow it to access real-time energy information and travel the grid to find available electricity.

"This is the beginning of the end of increasing electric rates for consumers nationwide," said Rick Zomnir, president of Strategic Energy Ltd.

Stranded Utilities: How Demographics, Not Management, Caused High Costs and Rates

Glenn D. Meyers, Buckner Wallingford II, and Horace J. DePodwin

And why policy on

stranded costs defies

a traditional legal or

economic analysis.

There are sound economic reasons why policymakers should allow electric utilities to recover stranded costs through a competitively neutral network access charge, or some similar fee. First, differences in the quality of utility management appear to have contributed little to differences in electricity rates among states.

Cinergy To Supply Power

Lori A. Burkhart

The Blue Ridge Power Agency has chosen Cinergy Corp. as the recommended supplier of wholesale electric power to five of its members during a seven-year period starting July 1, 1998.

Blue Ridge is a "joint action agency" that assists in making wholesale supply arrangements for eight municipal electric systems in the western part of Virginia. Cinergy replaces American Electric Power-Virginia as the power supplier, and beat out the other finalists (em AEP, Commonwealth Edison, Enron, and LG&E Power Marketing.

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