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Special Report

Fortnightly Magazine - July 1 1997

"in a place called acting in the public interest." In New Hampshire, the mediator may try to yank the decision back under that premise, he said.

Sen. Murkowski also asked the panel for Wall Street's reaction to the FERC's merger approval process.

Douglas W. Kimmelman, managing director of Goldman, Sachs & Co., observed there have been about 20 merger announcements, with no electric-to-electric combinations closed.

"We have all sorts of industries in this country where mergers impact consumers," he said. "I can't understand [taking] two years to think through the issues involved here."

"It may be worth noting that when United States companies bought British companies, the process closed in 90 days," Konolidge said.

"We are losing investment dollars out of this country," Kimmelman said. "Over the last three years [there have been] 27 utility investments overseas for $35 billion in financial closings made in the U.K. and Australia.

"In the U.S., over the same period, only $800 million of combinations have been actually closed. Utilities are saying, 'This market makes no sense. We don't know the rules. We need to go elsewhere.'"

"On the other hand, FERC justifies it by saying it has to do a thorough investigation to be satisfied," Sen. Murkowski added. "It's responsibility. And [it needs to] insulate itself from litigation."

"Maybe it's to prove their worth and existence (em the FERC that is," said Sen. Larry E. Craig (R-Idaho).

Sen. Dale Bumpers (D-Ark.) reviewed his bill with the panel and said it called for "prudently incurred and verifiable" stranded cost recovery. He questioned whether leaving the stranded debate to the states was wise. "It seems to me we are asking for utter chaos in an area where we're trying to bring some semblance of sanity to a really complicated issue."

But Fetter insisted that if the federal government ordered 100-percent recovery, commissions could then expect reactive litigation which would put utilities in court demanding that amount.

"We call it 'full' in the bill," Bumpers said. "It doesn't say '100 percent.'"

"Well, 'full' sounds like a lot," Fetter countered.

"If I were you gentlemen from Wall Street, where you worry about the stockholders and the bondholders and so on, I would think you'd be dancing in the streets over this provision in my bill," Sen. Bumpers said.

But Kimmelman asked: Who would determine the details of 'full' or '100-percent' recovery?

Bumpers said he wasn't suggesting that utility commissions not determine stranded costs, but that they needed guidelines to give the process some degree of certainty. "So that people know that when they go in and ask for stranded costs, they're going to have a set of criteria that the commission is going to have to follow instead of just being off on an ad hoc venture," he said.

But Kimmelman said regulators could interpret the broad language differently.

Ronald L. McMahan, president of Resource Data International Inc., testified that the industry has $202 billion in stranded costs. Of that figure, 10 states in the country (em just 43 percent of the market (em carry 86 percent of the