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PUCs in 1997: Managing the Competition?

Fortnightly Magazine - January 1 1998

for all customers in Monroe Township, N.J., which the utility had to modify before the year was out. Under the pilot, GPU would have selected an alternative supplier of competitive energy through a bidding process. Eligible customers could then have chosen a new supplier or decided to join other residents as an aggregated group to purchase energy. But according to GPU, no alternate supplier stepped forward to join the program that could guarantee savings for participants. GPU had to alter the program to entice Conectiv Energy, a subsidiary of Delmarva Power and Light Co., to join the pilot as a competitor. GPU said Conectiv agreed to join only if it could set up a multi-tiered rate structure to allow residential customers greater cents-per-kilowatt-hour savings than all other classes. As originally approved, the pilot would have provided equal percentage price reductions to all customer classes.

In approving the changes, the New Jersey board found that a multi-tiered market pricing plan should "allow hard-pressed residential heating customers to reap benefits from the program." %n10%n

Public Benefits: Letting Go of Subsidies?

Beyond taking on new tasks of in-market management, regulators are also determined to retain public policy goals familiar to traditional utility regulation, such as universal service, energy conservation, promotion of renewable resources and discounts or payment assistance for low-income customers. Efforts to continue these programs have emerged in particular in Pennsylvania %n11%n and California. %n12%n

Pennsylvania, for example, ordered electric distribution companies to submit comprehensive multi-year plans for universal service and energy conservation. To maintain universal service, utilities will enroll eligible customers (those with household income at or below 150 percent of federal poverty guidelines) in modified customer assistance programs. The programs will include features such as rate discounts and payments plans based on percentage of income, but must remain "competitively neutral."

In California, the commission set up new "public service programs" to support continuing efforts to maintain energy efficiency and low-income assistance, even as the market moves to competition. Funding for such efforts is provided for through a "nonbypassable surcharge" under the Assembly Bill 1890, the state's primary restructuring legislation. An independent board consisting of regulatory representatives and members of the public will oversee programs designed to privatize its existing energy efficiency efforts. A similar board will oversee the funding and disbursement of public assistance for low-income energy customers.

Elsewhere, regulators are considering portfolio standards, that would require electricity sellers to reserve a portion of the resource mix for renewable energy. Arizona, for example, will require all electricity sellers to maintain a renewable resource portfolio under its proposed rules for introducing retail competition. %n13%n

Ensuring Fairness:

An Objective View?

The urge to maintain and promote outcomes deemed to be in the public interest has forced PUCs to make judgments on the purpose, intent and efficacy of well-meaning programs, and whether they might work to the advantage of one competitor over another.

In Michigan the commission found that Consumers Power Co. should no longer be required to file integrated resource plans because the information could be used by competitors to create a competitive disadvantage