By unbundling usage from access, utilities can maximize contribution to margin and yet still retain load.
With deregulation and industry restructuring, energy utilities face price...
STRANDED COST RECOVERY. The Pennsylvania Public Utility Commission allowed Pennsylvania Power & Light Co. to recover $2.9 billion of a requested $4.5 billion in stranded costs, cutting a higher $4-billion allowance proposed earlier by an administrative law judge. The utility petitioned for reconsideration on June 26, after CEO William F. Hecht had called the decision "unacceptable," and noting that the PUC's written order, received June 15, appeared "even more injurious" to the company that the PUC's June 4 bench order. Among other points, the petition targets a PUC action that cut transition costs to reflect a decrease in depreciation expenses for nuclear assets. Docket No. R-00973954, June 4, 1998 (Pa.P.U.C.).
ELECTRIC RATE CASES. On June 8 Virginia Power reached an agreement that, if approved by the Virginia Corporation Commission, would save customers about $920 million through several rate cuts through 2002. A final decision was expected by Aug. 1. The company would write off $220 million of regulatory assets in 1998, but against that amount it would offset any earnings surplus above an equity return benchmark (30-year treasury bonds plus 450 basis points). Any further surplus would be allocated one-third to shareholders, and two-thirds to additional accelerated amortization of regulatory assets.
ELECTRIC PRICE-CAP PLAN. The Oregon Public Utility Commission OK'd a price cap plan for Pacific Power and Light Co. -- for the distribution function only -- that will cap rates using an index based on the forecasted change in the gross domestic product price index, with an offset for productivity of 0.3 percent. A balancing account will distribute any revenue surplus or shortfall by measuring actual temperature-adjusted sales against the revenue cap.
The plan includes an annual earnings review with "revenue sharing" rate adjustments if returns exceed or fall short of an initial benchmark (equity return of 10 percent) by more than 250 basis points. It also offers incentives for the utility to acquire renewable resources at lower-than-forecasted prices and contains a non-bypassable "systems benefits charge" to assess all consumers the cost of demand-side management and renewable resource programs. UE 94(Phase II), Order No. 98-191, May 5, 1998 (Ore.P.U.C.).
OFF-TARIFF DISCOUNTS. The Idaho Public Utilities Commission allowed Idaho Power Co. to restructure a special discounted rate contract to give discretionary purchasing options to FMC Corp. (a phosphorus producer that accounts for 14 percent of IP load). It also rejected claims the contract would allow one large customer to destabalize regional energy prices, or that the action represented de facto deregulation -- essentially granting direct access to FMC ahead of any decision to allow supplier choice for all customers. In a dissenting opinion, however, Commissioner Dennis S. Hansen voiced concern that the contract would permit FMC indirectly to "buy and resell power on the open market" -- a major shift in PUC policy that should require guidance from the state legislature. Case No. IPC-E-97-13, Order No. 27463, April 27, 1998 (Idaho P.U.C.).
ELECTRIC SHOPPING CREDITS. The Oregon Public Utility Commission approved a "shopping credit" of 1.98 cents per kilowatt-hour under an experimental program to introduce supplier choice for electric customers