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Fortnightly Magazine - July 15 1997

Peggy Welsh Winds Up: NARUC's New Exec Wants PUCs to Network with Congress Joseph F. Schuler Jr.

Joseph F. Schuler, Jr.

"When they come to town ... we'll ... accompany them to Capitol Hill ... to make their trip to Washington a 'two-fer,' if you will."

Paul Rodgers knocked NARUC on its ear last July when he announced his resignation as executive of that century-old association.

Rodgers, also general counsel, had served the National Association of Regulatory Utility Commissioners for more than 30 years.

His unexpected move came in the midst of strategic planning at NARUC.

Foreign Investment: Moody's Doubts Bondholder Benefits

Lori A. Burkhart

A new report from Moody's Investors Service finds that foreign investments often offer U.S. electric utility shareholders the prospect of higher returns, but hold little immediate upside benefits for bondholders.

The report, Some Investments Riskier Than Others in Wave of Overseas Expansion by U.S. Electric Utilities, finds that for bondholders, such investments detract from alternative uses of free cash flow. The bondholder could apply the invested money to debt service or repayment, or growing retained earnings to offset potential write-offs of stranded investment.

Off Peak

Minnesota has lots of drafts, but no final plan.

So you think your state has been busy? In Minnesota, the 1997 legislative session saw more than a dozen new bills introduced on electric, gas and energy issues.

At the start of the session many expected that electric deregulation would play a major part in the legislative program. However, Gov. Carlson reports now that legislators will defer work on the issue until the 1998 session. Several electric industry deregulation bills were introduced at the end of the session, but when last we checked no hearings had been held.

Does Activity-Based Cost Management Have Any Relevance for Electricity?

Sidney J. Baxendale, and Michael J. Spurlock

When viewed as serving market segments, utilities differ little from manufacturing companies, where most costs are shared among products and processes.

Activity-based cost management has had a tremendous impact on manufacturing enterprises; and its use has spread to some service industries such as banking, insurance and health care. ABCM encompasses two well-known management concepts: activity-based costing and activity-based management. Now that electric utilities are gearing up for competition, it is time to ask if ABCM has any relevance in the public utility industry.

N.Y. Would Reimburse Bypassed QFs

Lori A. Burkhart

The New York Public Service Commission has set up procedures to reimburse qualifying cogeneration and small power production facilities if any of the state's seven investor-owned electric utilities should curtail purchases of power from the QFs. The Independent Power Producers of New York Inc. blasted the decision.

The PSC said it will review QF requests for reimbursement if a utility is alleged to have curtailed purchases unfairly.

Electric vs. Gas Cont...

Dr. William Ryan; and Ed Reid

Mr. Lindsay's March 1 letter (PUBLIC UTILITIES FORTNIGHTLY, p. 6) requires some further discussion. We do agree that reducing cooling seasonal peak electric demand is desirable. Lessening the electric infrastructure's environmental effects and electric system failures, as we witnessed in the summer of 1996, is to the public good. However, thermal storage systems have siting issues and the potential to run out of capacity at the worst possible time on peak days.

KU Energy, LG&E Would Merge

Lori A. Burkhart

KU Energy and LG&E Energy have announced a merger agreement that could save the companies more than $760 million over 10 years and result in a rate cut of almost 2 percent for each of the next five years.

KU Energy, the parent company of Kentucky Utilities Co., and LG&E Energy, the parent of Louisville Gas & Electric Co., on May 21 announced the agreement to merge into a new holding company called LG&E Energy. The transaction is valued at more than $3 billion, with the combined companies holding assets of more than $4.7 billion.

Securitization: It Can Work

Howard Shapiro

I was surprised and disappointed at the limited and unbalanced perspective that Bruce Radford brought to his comments on securitization ("Wall Street's New Game," PUBLIC UTILITIES FORTNIGHTLY, April 15, 1997, p. 4).

The article implies that the push for securitization legislation is being driven by the investment community's desire to create an investment product with a guaranteed return.

PECO Gets $1.1 Billion

Lori A. Burkhart

At a proceeding marred by hecklers and the arrest of five protesters, the Pennsylvania Public Utility Commission finalized a preliminary decision awarding PECO Energy Co. $1.1 billion of its requested $3.8 billion in stranded cost recovery (Docket R-00973877).

On May 8, by a 4-1 vote, the PUC issued a nonbinding order to allow PECO to refinance the $1.1 billion in stranded costs at lower interest rates through issuance of asset securitization bonds to be paid over 10 years.

Ratepayers Will Save

James L. Seward

I read with interest your editorial regarding securitization in the April 15 edition of PUBLIC UTILITIES FORTNIGHTLY. As the chairman of the New York State Standing Committee on Energy & Telecommunications, I must take issue with your inclusion of statements from opponents to such legislation without providing its sponsors with the opportunity to press their case.

The Senate, on March 19, 1997, passed legislation that I sponsored at the request of Gov. George E.

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