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News Digest

Fortnightly Magazine - July 15 1998

first divestiture of a utility's entire portfolio of fossil-fueled generating assets as a deregulation strategy. The sale took place expeditiously, as Sithe -- reportedly the third-largest independent power producer in the U.S. -- was named the winning bidder in December 1997, agreeing to pay $657 million for 12 generating units with 2,000 megawatts of capacity.

Sithe will pay $536 million for the generation assets and another $121 million for a six-month transitional power sales contract. The book value of the plants and sites is $450 million. Meanwhile Sithe has begun engineering feasibility studies at certain sites where it plans to invest $1 billion over the next three years to construct natural gas plants with 2,800 MW of additional capacity.

Massachusetts implemented deregulation on March 1, becoming the first state to allow electric choice for all customers, rather than phasing-in competition.

UNITED ILLUMINATING. The United Illuminating Co. announced on May 20 that it will begin to divest itself of its three fossil-fueled electric generation plants and its purchased power agreements to comply with Connecticut's restructuring law, which introduces competition by 2000.

The law requires Connecticut's utilities to submit a divestiture plan by Oct. 1, but allows utilities to bid on their own plants. However, UI does not plan to bid on its assets, and instead will concentrate on electric delivery and other nonregulated opportunities. Assets for sale are: the 667-MW Bridgeport Harbor Station; the 466-MW New Haven Harbor Station; the 75-MW English Station; a 5.45-percent share (66 MW) of Hydro Quebec; and 63 MW in purchased power contracts. UI estimated total book value of its plants of $220 million by the time the sale closes. Excluded from the package are UI's 17.5 percent (203-MW) share in the Seabrook nuclear plant, and its 3.8 percent or 41-MW share in the Millstone 3 nuclear plant.

State Legislatures

NEW YORK. New York Assembly Speaker Sheldon Silver on May 20 introduced an electric restructuring package comprised of three proposed bills, which if enacted would reduce rates by an immediate 10 percent for all customers, with an ultimate goal of a 25 percent.

Silver, who has been at odds with the PSC over its restructuring of electric markets on a utility-by-utility basis, said, "The PSC has repeatedly sold out ratepayers." Silver believes that other states have been able to dramatically reduce rates through restructuring, while the gap between New York and those states has grown. He pointed out that the average rate charged by New York's IOUs was 4 percent greater than the U.S. average in 1996. Also, New York ranks 47th of the 50 states in job growth. Neither reductions in gross receipts taxes on utilities enacted last year by the legislature, nor the modest rate cuts negotiated with utilities by the PSC, has been sufficient to reverse that trend, said Silver.

Bills included in the package are:

• Competition Plus (Assembly Bill 7942-D) -- requires a 10-percent electric rate cut in September, with more cuts two years later totalling 25 percent. Also, all customers would have supplier choice by 2000;

• PSC Elections (A.8245) -- A constitutional amendment