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Fortnightly Magazine - June 15 1998

News Analysis

Joseph F. Schuler Jr.

EVEN IF 3,000 WORKERS AT THE LOS ANGELES DEPARTMENT of Water and Power should opt for a separation package instead of wholesale layoffs, an ad hoc employee group plans to go ahead with a lawsuit claiming the deal violates California's restructuring statute, Assembly Bill 1890.

That move to go to court - as described by a representative of the Employees Legal Defense Fund - could supply a bargaining chip to help the ELDF save the jobs of a few hundred workers who might not take the package but whose positions are targeted for cuts. The department has about 8,600 employees.

Perspective

Craig A. Glazer

COMPETITIVE transition charges. Wires charges. Securitization payments. Every stranded cost recovery mechanism considered to date requires customers to pay for electric utility stranded costs through direct assessments on monthly bills. These charges will continue for many years after competition is introduced.

There is a real irony here: As we seek to introduce competition into the electric industry, we as regulators are forced to invoke all of the most heavy-handed tools to extract payments from citizens.

Special Report

Lori A. Burkhart

THE RUSSIAN FEDERATION WANTS U.S. UTILITIES AND businesses to know investments are welcome and that processes soon will ensure the safety of American ventures there.

Nevertheless, it appears to favor traditional, American-style utility regulation, setting rates of return and limiting profits.

The Federal Energy Commission of the Russian Federation wants to create competition wherever possible, according to Andrey F. Zadernyuk, the first chairman of the year-old commission.

Off Peak

Alan J. Cox and Jonathan Portes

DEREGULATION OF ANY INDUSTRY OFTEN LEADS TO consolidation and merger, which frequently bolsters the involved companies' stock prices.

In the SBC/Pacific Telesis merger, intervenors argued before the California Public Utilities Commission that the change in the value of Pacific Telesis' stock was a measure of the merger's "benefits" to shareholders. They said the PUC should force the merged company to rebate half those benefits to ratepayers.

Analysts use stock market information in an "event study" to measure the economic impact of a particular event.

Ma Bell's Legacy: Time for a Second Divestiture?

Trevor R. Roycroft, Ph.D.

TWO YEARS HAVE ELAPSED SINCE CONGRESS PASSED THE Telecommunications Act of 1996 to "provide a pro-competitive, de-regulatory national policy framework designed to accelerate rapidly private sector deployment of advanced telecommunications and information technologies and services to all Americans." %n1%n

Today, however, telephone deregulation has reached an impasse. Few customers enjoy competitive alternatives for local exchange service. Concentration in long-distance markets appears to be increasing.

Inventing a Business in Wires & Pipes

Joseph F. Schuler Jr.

IF COMPETITIVE ELECTRIC MARKETS PROMISE LEAN MARGINS and slim savings on commodity sales, then perhaps transmission and distribution companies could play a larger role in selling end-user services.

Yet low-risk T&D companies, building on their reputations as reliable providers, may need to grow to acquire the "critical mass" needed to make money selling services over delivery systems.

One of the few, if not only, businesses publicly betting on this strategy is the $4.1-billion GPU Inc. of Morristown, N.J. - and GPU means business.

Universal Service: A Performance-Based Measure for Competitive Industry

Roger D. Colton

UNIVERSAL SERVICE ATTRACTS MUCH ATTENTION these days, both in energy and telecommunications. But how do you measure success? Do regulators decide when goals are met by looking across an industry, or should management make the call company by company?

Consider the Telecommunications Act of 1996. It identifies the maintenance of affordable, or "universal," service for low-income consumers as an explicit statutory goal. In the electric industry, virtually every piece of restructuring legislation and every regulatory decision to date has included a universal service provision.

Competitive Reciprocity: By Checklist or Certification?

M. Bryan Little

IF CONGRESS SHOULD CONSIDER LEGISLATION TO MANDATE retail wheeling - and even with a date certain - those states that have already opened their markets will still likely ask for reciprocity to guarantee that any competitor seeking entry will welcome competition in its own home territory. Why? Some states are moving more quickly than others. Second, others have indicated they do not intend to open at all.

Arguably, state lawmakers could enact a reciprocal covenant on their own.

Frontlines

Bruce W. Radford

Try this: Buy wholesale power at 3.2 cents per kilowatt-hour; sell at 2.8 cents. That's the deal in Massachusetts. No wonder Enron fled, seeing no margin for profit.

In fact, when I called a friend at a power marketing company to learn more, he said his company had given up hope and was leaving the state.

Utilities can swallow this loss, he explained. They can defer the four-mill shortfall and accrue it for billing later, like a regulatory asset. The state's Department of Telecommunications and Energy allows it.

People

UNISOURCE Energy Corp. elected Larry W. Bickle and Harold W. Burlingame to its board of directors. Bickle is the former chairman and CEO of TPC Corp. and cofounder and managing director of Haddington Ventures LLC. Burlingame is executive vice president of human resources at AT&T and a director of the Work in America Institute.

John Devine, vice president of Duke Engineering & Services, was elected president of the National Hydropower Association. Devine has served as a director of the National Hydropower Association since 1993.

James E.

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