A line-by-line case study of two high-priced portfolios, comparing fixed, variable and capital costs against forecasts of regional market prices.
A multi-billion-dollar wave of utility...
The governors of Maine and Montana (em two states with very different electricity markets (em have signed three bills into law to allow competition in the electric and natural gas industries in their respective jurisdictions.
Maine. Gov. Angus King signed an electric restructuring bill that mandates competition in the state starting March 1, 2000.
The Maine law, An Act to Restructure the State's Electric Industry, L.D. 1804, was signed on May 29. It allows for recovery of stranded costs as determined by the Maine Public Utilities Commission. The allowance tracks dimunition of market value and introduction of competition: 1) for generating plants, the difference between net plant investment and market value; and 2) for purchased power contracts, the difference between future contract payments and the contract's market value. The law bars any recovery for regulatory assets created after April 1, 1995, with some exceptions.
The bill also mandates divestiture of electric generation facilities by Central Maine Power Co., Bangor Hydro-Electric Co., and Maine Public Service Co. by March 1, 2000. Some exceptions include ownership in nuclear plants and contracts with QFs. Requirements differ somewhat for Maine Public Service because the company owns facilities that fall under Canadian jurisdiction. The Maine PUC may require divestiture of the Maine Yankee nuclear plant interest on or after Jan. 1, 2009.
While signing the bill, Gov. King said, "We need to lower our expectations a little bit and not believe that we're going to come out of this and see lower electric rates in the next two weeks, next two months, or perhaps even the next two years." King said to expect lower rates due to the legislation in the "foreseeable future."
Montana. Out West, Montana Gov. Marc Racicot (R) has signed bills that introduce competition into two segments of the state's utility industry: S.B. 390 opens electric to competition and S.B. 396 deregulates natural gas.
Under S.B. 390, large industrial customers can choose electric suppliers beginning July 1, 1998. All customers can choose suppliers by July 1, 2002. Utilities must freeze rates from July 1, 1998 through June 30, 2002. A utility must detail its stranded costs and submit it to the Montana PSC for recovery. The PSC will review the submission and the utility's mitigation efforts. The PSC will then rule on how much recovery will be allowed.
The gas bill unbundles natural gas services and allows the PSC to license new natural gas suppliers. The bill mandates reciprocity, requiring that a gas utility be unbundled if its marketing affiliate wants to supply gas to customers of another utility.
Meanwhile, Montana Power has filed a settlement agreement with the Montana PSC that would reduce natural gas rates by $2.8 million, freeze base rates for two years and allow customer choice of supplier by July 1, 2002. The stipulation recognizes provisions of the recently enacted Natural Gas Restructuring and Customer Choice Act. Those items include recovery of transition costs, use of transition bonds to mitigate transition charges and implementation of a Universal Systems Benefit charge to finance public purpose programs.
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