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Fortnightly Magazine - June 1 1997

People

Jay L. Witkin replaces Jerome Feit, who retired, as the Federal Energy Regulatory Commission's solicitor. Also at the FERC, Judith Ann Dowd will serve as an administrative law judge. Dowd joins the FERC from the National Labor Relations Board.

PacifiCorp hired John Carr as assistant v.p., global industrial sales. Carr joins PacifiCorp from Direct Services Industries, where he served as an executive director.

Melissa L. Reese was hired by CMS Marketing, Services and Trading as a natural gas trader. CMS Marketing is the energy marketing unit for CMS Energy Corp.

Electric Utilities Seek Rate Caps in Rail Merger Case

Phillip S. Cross

The U.S. Court of Appeals for the District of Columbia has affirmed a 1995 order by the Interstate Commerce Commission (now the Surface Transportation Board) approving the merger of two major railways serving the western U.S., despite claims by several electric utilities that the merger would result in unfair rail prices.

The appeals court rejected claims by the electric utilities that the ICC should have assigned trackage rights and imposed rate caps while approving the merger of Burlington Northern Inc. and The Atchinson, Topeka and Santa Fe Railway Co.

Allegheny-Duquesne Merger Claims Billion-Dollar Savings

Lori A. Burkhart

Allegheny Power System Inc. will merge with DQE Inc., parent company of Duquesne Light Co., to form Allegheny Energy, which will save both companies about $1 billion over the next 10 years.

The new company will have a total market capitalization of $10.6 billion: $6.2 billion in equity and $4.4 billion in net debt and preferred stock.

"Allegheny Power is a winter-peaking operation: Its low-cost, efficient operations and suburban and rural customer mix fit well with our summer-peaking operation and urban customer base," said David Marshall, President and CEO of DQE.

Washington State Approves Puget Energy Merger

Phillip S. Cross

The Washington Utilities and Transportation Commission has authorized the merger of Puget Sound Power & Light Co. and Washington Natural Gas Co.

The merged company will be renamed Puget Sound Energy, to operate as a combined electric and gas utility headquartered in Bellevue, Wash.

Under the settlement agreement, general rates for natural gas will remain unchanged until Jan. 1, 1999. Electric rates will be lowered between 1.9 percent and 6.3 percent, depending on customer class.

Enron Bows to Oregon Rate Cuts

Lori A. Burkhart

Enron Corp. has acquiesced to a demand from the Oregon Public Utility Commission for $141 million in rate cuts as a condition to approval of the proposed merger between Enron and Portland General Corp.

The PUC staff had informed Enron in March that it would not approve the merger, based on Enron's proposed $61-million rate cut, and said it would only accept $141 million in guaranteed cost savings and rate cuts.

The trade-off is that shareholders of Portland General will receive less for their stock than Enron originally had offered.

Pa. Sets Policy on Liability Waivers

Phillip S. Cross

The Pennsylvania Public Utility Commission has issued a set of guidelines for the development of "enforceable" tariffs that seek to limit a utility's liability to consumers for damages associated with the provision of utility services.

It directed the state's utilities to make sure that tariffs waiving liability are consistent with six principles:

1) Events covered lie within the commission's expertise and are subject to its ratemaking authority.

2) Limitations on liability may apply in case of interrupted service or property damage only and not personal injury.

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.

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