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Fortnightly Magazine - July 1 1997

Unlikely Alliance to Bid on Plants

Lori A. Burkhart

The Conservation Law Foundation of Boston and AES Corp. have teamed up to bid on the 18 New England Electric System power plants recently put up for sale under the NEES divestiture plan that is part of its restructuring settlement.

The unusual alliance puts the conservation group with a former industry adversary. If the alliance succeeds in its bid, it likely would close up to five of the most polluting plants to reduce acid rain and smog. Also, it would protect about 30,000 acres of land from development.

Water Utility to Treat for Radon Contamination

Phillip S. Cross

Responding to a high level of consumer concern, the Connecticut Department of Public Utility Control has directed a water utility to treat supplies from one of its underground supply sources to reduce radon contamination.

The department said Bridgeport Hydraulic Co. could recover the costs over three years through a surcharge on customers in its Litchfield division who use the contaminated water. The department acknowledged there is no public health standard for radon in drinking water.

Southern Co. Buys German Utility

Lori A. Burkhart

Moody's on May 14 said it would maintain a negative outlook on The Southern Company's Prime-1 short-term rating for commercial paper following The Southern Company's announcement that it will acquire a 25-percent ownership interest in Berliner Kraft und Licht AG (Bewag), an electric distribution company in Berlin.

Southern will purchase a 25-percent share for $830 million, pending approval by Berlin's parliament and European regulators. A recently established consortium, consisting of Southern Co.

Mich. Examines Gas Brokering, Appliance Repair

Phillip S. Cross

The Michigan Public Service Commission has authorized Michigan Gas Utilities to increase rates and has ruled that revenues booked by an affiliate that offers administrative, gas brokering and appliance repair services should be included as part of the utility's net income.

The commission said Michigan Gas can increase rates $1.7 million, including an allowance for return on equity of 10.75 percent.

Michigan Gas had excluded from rate calculations revenues found unrelated to utility operations, such as an unregulated affiliate's propane operations.

California IOUs Seek Securitization

Lori A. Burkhart

California's three largest investor-owned utilities have asked the California Public Utilities Commission to approve securitization of up to $7.3 billion of stranded costs.

The utilities would issue 10-year bonds through the state infrastructure bank starting by the end of 1997. The "rate reduction bonds" would be repaid through a stranded cost charge levied on present ratepayers. The amounts applied for are: $3.5 billion by Pacific Gas & Electric; $800 million by San Diego Gas & Electric Co.; and $3 billion by Southern California Edison Co.

Off Peak

Retail wheeling in Kansas: Stranded costs could bewitch customer choice.

With the advent of retail wheeling, some customers will see their electricity prices fall while others will see them rise. And stranded costs may have a lot to do with it (em at least according to a report by the Docking Institute of Public Affairs at Fort Hays State University in Kansas.

Public Power in a Competitive Electricity Market

Richard Munson

Subsidies? Maybe. But how about reciprocity? Should Congress let PMAs, munis and co-ops decline open access?

Until recently, most congressional debate on utility deregulation has focused on the future of investor-owned utilities and independent power producers and marketers. Lobbyists for government-owned or cooperative-owned power companies have tried to downplay their clients or to seek exemptions.

Arbitration Group Focuses on Electric, Gas Disputes

Lori A. Burkhart

The American Arbitration Association, in response to a growing level of interest by the electric and natural gas industries, has established the "National Energy Panel" to resolve disputes through mediation and arbitration.

The new panel is composed of 33 of the nation's leading energy industry experts and will resolve a range of disputes involving production, contracts, finance and marketing.

Optional Two-Part Tariffs: Toward More Effective Price Discounting

Ronald Rudkin, and David Sibley

By unbundling usage from access, utilities can maximize contribution to margin and yet still retain load.

With deregulation and industry restructuring, energy utilities face price competition from marketers, brokers, independent producers and even other utilities. To succeed in this environment, utilities will need to develop innovative pricing strategies that better meet customer needs and respond more effectively to competition. The common response by utilities to competition calls for price discounting to retain "at risk"

customers by meeting the competition head-on.

Low-Cost Federal Hydropower Shared With IOUs

Lori A. Burkhart

An agreement between PacifiCorp and Bonneville Power Administration will lead to an 8-percent rate cut for PacifiCorp.'s Utah Power irrigation customers in Southeastern Idaho. Impetus for the agreement came from two Idaho legislators, the governor's office and the congressional delegation.

The proposed agreement was filed at the Idaho Public Utilities Commission and also will go through BPA's internal review process. The agreement will result in payments totaling $47.7 million over the next four years from BPA to PacifiCorp for Utah Power's Idaho residential irrigation customers.