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Fortnightly Magazine - October 15 1997

Moody's Southeast IOUs Can Compete

Lori A. Burkhart

Investor-owned utilities serving the Southeast U.S. are well-positioned to face increasing competition, but the region's municipal joint power agencies and electric co-ops may face serious losses.

That's the finding of a Moody's Investors Service regional study, the fourth in a series.

The "Southeast Electric Break-Even Analysis" estimates $24 billion in stranded costs for the region, with cooperatives and JPAs holding a disproportionately high portion of the per-kilowatt costs.

Off Peak

David Anthony

Each is unique, whether big or small, niche or mass-market.

Downsizing. Deregulation. Open access. That ought to boost both supply and demand for utility consultants, as unemployed middle managers seek out new careers and utilities struggle to survive in a more competitive and faster-moving environment.

However, since consultants come in many colors, which is right for you and your company?

Diversified Monoliths

As the giants of the consulting world, this category includes firms such as McKinsey, Andersen Consulting, The Big Six consultancies, and Booze-Allen.

New York Solar Homes Get Tax Break

Lori A. Burkhart

New Yorkers could get tax breaks of up to $3,750 for installing solar systems, beginning next year.

New York Gov. George F. Pataki signed into law on Aug. 19 the "Solar Choice Act," aimed at encouraging solar energy system investments through income tax credits. The Act also would allow residential customers to receive the full retail value of the electric generated by their systems.

PEPCO Wants Hike, Blames Merger Delay

Lori A. Burkhart

Potomac Electric Power Co. says merger delays are costing it money and it's asking the Maryland Public Service Commission to approve a rate increase.

PEPCO says savings achieved from its proposed merger with Baltimore Gas and Electric Co. would have absorbed the increased costs. The merger would form Constellation Energy.

The rate increase would be only for the utility's Maryland customers.

Electric Competition: A Gas Booster

Lori M. Rodgers

Restructuring of the electric industry "is not an impediment" for the natural gas industry, according to Paul Holtberg of the Gas Research Institute. Just make sure to distinguish between restructuring's evolution, or transition period, and the post-transition period, he adds.

The just-released 1998 edition of GRI's "Baseline Projection of U.S.

Gas Restructuring: Can Distributors Repeat the Success of Pipelines?

S. Lawrence Paulson

A talk with two LDCs. First, PSE&G appears content to cede sales to marketers, Second, NW Natural intends not to give in just yet.

This much is clear: Energy utilities are headed for an unbundled future.

As states from both sides of the country implement residential and commercial natural gas unbundling, require residential choice pilot programs and grapple with electric industry restructuring, competition shows no signs of slowing. To boot, some members of Congress seem eager to give competition a national push.

Rate Cut Depend on Stranded Costs, Time

Lori A. Burkhart

A new report from the Department of Energy may confirm what many in the electric industry have said all along: That while stranded costs could dissolve some short-term gains from competition, in the long term, consumers will still come out ahead.

"I'm surprised and delighted that the same EIA, which once wrongly predicted price hikes from natural gas deregulation, now confirms what we've been saying all along," said Rep. Tom Bliley (R-Va.).

Spectrum Auctions at the FCC: A Lesson for Utilities?

Shirley S. Fujimoto, and Christine M. Gill

When the fanfare dies down, winners face the same challenge as with any new start-up but may enjoy more options than incumbent licensees.

The Federal Communications Commission's auctions of spectrum should concern two types of energy utilities: those who participate in the auctions and those who don't.

Initially, these auctions were viewed as a spectacular new regulatory tool (em able to raise billions of dollars for the public, without troubling the overburdened taxpayer. As of late, however, a dark side has emerged. Bidders have cried fraud.

NRC Eyes Decommisisoning Funds in Restructuring Statement

Lori A. Burkhart

The Nuclear Regulatory Commission has issued a final policy statement on its intended approach to nuclear plant licensees as the electric industry moves toward greater competition.

While the NRC has concluded that its regulations can address future changes, it is considering revising its financial and assurance requirements for decommissioning funds.

Winners' Curse: Why Spectrum Bidders Overpaid

Stephen Maloney

(And why power plant buyers may follow suit.)

"WINNERS' CURSE" IS IMPORTANT TO THE UTILITY ASSET AUCTIONS. Winners' Curse is the tendency for the "rookies" and the wide-eyed visionaries to overbid in auctions with uncertain valuations.

The spectrum auctions at the Federal Communications Commission reveal the Winners' Curse even in the more "successful" rounds, despite the agency's elaborate precautions.

FCC's 14 spectrum auctions booked almost $23 billion in license fees (em almost $10 billion in broadband personal communications services (PCS).

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