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California Electric Restructuring Update
California regulators have issued a series of important rulings this spring as they continue to move forward with restructuring the state's electric utility industry.
On May 6, the California Public Utilities Commission accelerated the pace of its industry reform by ordering all electric utilities in the state to allow direct access to alternate electricity suppliers for all customers on Jan. 1, 1998. Other related rulings cover issues such as billing and metering, transactions with affiliates, the effect of restructuring on performance-based ratemaking measures and consumer education requirements.
Direct Access. After reviewing the direct-access proposals developed by the state's largest electric utilities (em Pacific Gas and Electric Co., Southern California Edison Co., and San Diego Gas and Electric Co. (em the commission found no technical constraint to an immediate start-up. It also noted that state legislation enacted while the commission was developing its restructuring policy permits all customers to choose suppliers; not just industrial customers or those served by the state's largest utilities.
The commission acknowledged the possibility of certain "commercial constraints," such as the ability of the utilities to process the initial round of direct-access requests. However, it found that market forces likely would limit the number of customers choosing the direct-access option during the formation of restructuring.
In addition, the commission concluded that immediate implementation of the direct-access option would limit undue influence by investor-owned electric utilities influence on prices in the new power exchange spot market. It said if spot prices were to rise because of market power by any entity, customers could decide to buy electricity through the direct-access market. To address market power concerns in both the power exchange and the direct-access market, the option to choose "cannot be merely a theoretical option for consumers, but must be a full developed and viable option," the commission said.
The commission also found the original
8-megawatt eligibility limit for participation was no longer appropriate. Since the adoption of the restructuring plan it had developed a process under which new entities known as "scheduling coordinators" would reduce the transaction processing burden on the transmission system. (It is anticipated that the new scheduling coordinators will reduce confusion on the system by aggregating various transactions and bundling them into a "balanced schedule" before submitting them to the independent system operator.) Such a system effectively substitutes for minimum-aggregation load levels, the commission said. Re Proposed Policies Governing Restructuring California's Electric Services Industry and Reforming Regulation, R.94-04-031, Decision 97-05-040, May 6, 1997 (Cal.P.U.C.).
In its initial restructuring policy issued last year, the commission had said that the utilities could limit availability of direct access to larger customers or groups. It had planned to initiate restructuring with the formation of a wholesale spot market and an independent system operator for the state's transmission system. It also would have phased in direct access, with all customers eligible within five years. See, Re Proposed Policies Governing Restructuring California's Electric Services Industry and Reforming Regulation, 166 PUR4th 1 (Cal.P.U.C. 1996).
Billing and Metering. At the May 6 hearing, the commission also ruled that competitors may provide their own consolidated