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Fortnightly Magazine - October 15 1997

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).

New York Utilities Ask for Market-Based Rates

Lori A. Burkhart

Six out of eight members of the New York Power Pool have asked the Federal Energy Regulatory Commission to approve a request to provide electricity, installed capacity and ancillary services at market-based rates in the state's restructured market.

Included in the Aug. 15 filing are market power analyses for individual members and a plan for monitoring the proposed New York ISO. According to the utilities, the analyses demonstrate that the market under the proposed industry structure will be workably competitive. They also support the market-based rate proposal.

Pipeline Restructuring: Slicing a Shrinking Pie

Bruce W. Radford

THE FERC TAKES SUGGESTIONS ON THE FUTURE OF THE GAS INDUSTRY.

Earlier this year, the Federal Energy Regulatory Commission opened a discussion of issues facing the natural gas industry. Its aim? To set "regulatory goals and priorities" for the era following from Order 636, issued in 1992. %n1%n

To gather input, the FERC scheduled a two-day public conference. It asked for comments on a myriad of topics, ranging from cost-of-service rates to hourly gas pricing and services.

Foreign Utility Investments are Questioned

Lori A. Burkhart

Campaign for a Prosperous Georgia has asked the United States Court of Appeals for the Eleventh Circuit to reconsider and vacate orders by the Securities and Exchange Commission allowing Southern Co. to move forward with investments in foreign companies.

CPG claims that the SEC should have denied the utility's request to acquire foreign utilities using financing and guarantees of more than 50 percent of retained earnings. The company claimed that such acquisitions violate "safe harbor" limits. The filing points to the recent agreement by Southern Co.

Investor-Owned Utilities: Adjusting the Focus

Kent Knutson

Throughout the 1990s, investor-owned utilities have redefined the way they do business to position themselves for competition better. The downside of these efforts is higher rates for small customers and employee layoffs.

Today, IOUs are more focused on improved efficiency. IOUs are concentrating on keeping large customers, investing less in their utility systems and retiring debt.

Though IOUs continue to dominate electric generation nationwide (74 percent), electric output has increased by only 8.1 percent since 1990.

Perspective

Edward L. Flippen

With benefits unclear, PUCs will "go slow."

California, New Hampshire, Massachusetts, Nevada, Pennsylvania, Rhode Island, and Vermont have given customers the right to choose their electric providers.

Other states are considering similar legislation.

In Congress, U.S. representatives Schaefer (R-Colo.), Markey (D-Mass.), DeLay (R-Tex.), and U.S. Sen. Bumpers (D-Ark.) and others have slapped bills on the table that would give choice to electric customers on a national scale.

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