The Dow Jones Utilities Index posted another year of solid gains in 2006. As might be expected, in connection with both the near-term and longer-term historical investor performance of the utility...
USE OF U.S. ECONOMY UPHELD FOR EQUITY CALCULATIONS
The Federal Energy Regulatory Commission, in seven rate cases involving interstate natural gas pipelines, has upheld a new policy on the appropriate long-term growth rate to be used in computing their return on equity. Five of the pipelines contested FERC's new policy, as announced in Opinion 396-b.
The Commission defended the rate-setting method, but decided to allow the pipelines a chance to prove why the rules should not apply to them. The contesting pipelines are: Trailblazer Pipeline Co. (Docket No. rp97-408-002); CNG Transmission Co. (Docket Nos rp97-406-001 and rp96-144-001); Equitrans, LP (Docket Nos. rp97-346-003 and tm97-324-001); Koch Gateway Pipeline Co., (Docket No. rp97-373-001); and Wyoming Interstate Co., Ltd. (Docket No. rp97-375-001).
On June 11, the FERC had applied the long-term growth rate for the U.S. economy, as measured by the gross domestic product, to use with the discounted cash flow method to set rate of return on equity for Northwest Pipeline Corp. (Opinion No. 396-b, Docket Nos. rp93-5-025 and rp93-96-005) and Williston Basin Interstate Pipeline Co. (Docket Nos. rp92-163-007 et al.). The Commission used an average of GDP projections from well-known forecasting firms: DRI/McGraw Hill's Energy Review and the DOE's Energy Information Administration's Annual Energy Outlook.
FERC Chair Hoecker said he plans to call a mid-winter conference to discuss the relationship between the evolving gas business and financial markets, including Wall Street.
FERC APPROVES AMEREN MERGER
The FERC has approved the merger of Union Electric Co. and Central Illinois Public Service Co., a subsidiary of CIPSCO, to form a new holding company, Ameren Corp. (Docket Nos. ec96-7-000 et al.).
The FERC on Oct. 15 found that a five-year rate cap would shield ratepayers from any merger-related increases. It found that competition will not be harmed, and that concerns over possible transmission constraints on Union Electric's system had been alleviated by Union Electric's plans to expand its transmission facilities.
The combined electric and gas assets of the two utilities are valued at $8 billion. The new company will serve 1.5 million electric and 300,000 natural gas customers in Missouri and Illinois. While merger approval has been received by the commissions in Missouri and Illinois, approvals still are needed from the Securities and Exchange Commission and the Nuclear Regulatory Commission.
COALITION CHALLENGES NEW YORK COMBO
A coalition has filed a petition at the FERC asking that it reject the proposed Long Island Lighting Co. and Long Island Power Authority combination.
The coalition claims the transfer would block competition on Long Island for at least 10 years and would eliminate future regulatory oversight of the two companies.
The arrangement calls for the nonprofit LIPA to assume and refinance with tax-free bonds the $7.6 billion of debt owed by LILCO. Thereafter, LILCO would retain its generating assets and gas distribution system but give LIPA an option to purchase the power plants in the fourth year of the deal. In any case, LIPA would purchase 3,900 megawatts of LILCO capacity for at least 10 years.
In the petition, the coalition claims that, "A private monopoly intends to deprive local