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Fortnightly Magazine - July 1 1997

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.

A Break in TVA's Fence

Lori M. Rodgers

How one Va. city squeezed through the cracks

Tennessee Valley Authority Chair Craven Crowell told the Tennessee Valley Public Power Association annual meeting in May: "We need to make sure our customers get the best prices and best service available in the electric power industry." But one customer's attempt to get lower prices has been 10 years in the making (em and TVA won't be selling to them for much longer.

Earlier this year, the Bristol, Va., Utility Board voted to end a tradition of 45 years of wholesale power purchases.

Marketing and Competing

Leonard M. Fuld, and Diane Borska

Identifying a core competency is not as easy as it seems.

Utilities have developed a "Gold Rush" mentality. That is, they have begun to chase after the latest (em and sometimes fleeting (em opportunities, often abandoning their roots and their long-held strengths in the process. Supposedly, this first-in-market race will allow traditional utilities to remain competitive. Yet, all this racing has caused strong regional players to enter markets blindly, without the competitive knowledge or strategic underpinnings that will allow them to succeed in the long term.

Frontlines

Bruce W. Radford

Speaking on June 11 in Washington, D.C., at a symposium sponsored by the Institute of Electrical and Electronics Engineers, Rep. dan Schaefer (R-Colo.) was heard to say that he would have his electric restructuring bill out of committee by the end of July. He said his bill would mandate electric competition by 2000--just the sort of deadline that Texas Public Utility Commission Chair Robert Gee likes to call a "Hong Kong" clause.

Will the millennium bring the dawn of customer choice? Here we are, halfway through 1997. Hong Kong is now Chinese, but in America we are still ratepayers.

Special Report

Joseph F. Schuler, Jr.

Senate panel lobs shots at FERC's slow merger approvals.

Wall Street analysts and shareholder reps are urging Congress to help electric utilities recover stranded costs during nationwide deregulation to prevent a "cratering" of energy stocks.

One analyst recently testified that investors never expected 100-percent recovery. Another suggested that federal legislators should let states hammer out their own solutions.

But determining fair compensation state by state won't be easy, as witnesses and lawmakers conceded at recent hearings on Capitol Hill.

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