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News Digest

Fortnightly Magazine - September 15 1998

DOE SECRETARY CONFIRMATION. The Senate Energy Committee on July 29 approved United Nations Ambassador Bill Richardson to become the next energy secretary, replacing Federico Pen~a, who resigned in June. Two of the 20 committee members voted "present", which is equivalent to abstaining.

Recently, Senate Energy Committee Chairman Frank Murkowski (R-Alaska) challenged Richardson to deal with nuclear waste issues: "Despite the fact the federal government already is in default on its contractual obligation to take waste from our nuclear utilities, this Administration has no plan to solve the problem," he said. "Ambassador, are you going to carry this same empty portfolio?"

FERC

CALIFORNIA POWER PRICING. Until it can gather more information, the FERC has granted an emergency request by the California Independent System Operator to limit (at its own discretion) the price it pays to acquire certain reserve power (spinning, non-spinning and replacement reserves) from supply bidders that have been granted market-based pricing authority. Docket Nos. ER98-2843-001, July 17, 1998 (F.E.R.C.).

The ISO alleged that it had seen dramatic price spikes for replacement reserve capacity, claiming the problem stemmed from two FERC orders issued June 30 and July 10 allowing four companies to charge market-based rates for ancillary services while the utility generating plants remained subject to cost caps. Meanwhile, the ISO had instituted a price cap of $500/MW for replacement reserves until the FERC answered.

BILATERAL SPOT MARKETS. By a vote of 4-1, with Commissioner Curt Hébert dissenting, the FERC has declined to reconsider its March 25 order asserting jurisdiction over Automated Power Exchange, a bilateral electricity spot market that competes directly with the California Power Exchange by using computer software to match buyers with sellers. Docket Nos. ER98-1033-001 et al., July 15, 1998.

APX President Edward Cazalet said that the FERC was attempting to make an "impossible distinction" between APX and brokers. "Brokers are exempt from regulation, the FERC claims, because they do not take title to power, do not control electric utility facilities and do not set prices," Cazalet said. "Yet, the FERC claims that because the APX and PX employ a computer algorithm, they set the market price for electricity and therefore, unlike brokers, they should be regulated and taxed."

GAS PIPELINE RATES. In reviewing a pipeline rate settlement, the FERC has asked an administrative law judge to examine whether Texas Gas Transmission Corp. should set up a separate rate zone for its upstream production area, as urged by competitor NorAm, to segregate production costs from rates paid by customers in downstream rate zones in market areas. Docket No. RP97-344-008, July 15, 1998.

Commissioner Linda Breathitt dissented, asking why NorAm (not a shipper on the Texas Gas system) should have a hand in rate design. (Note: On July 31 the D.C. Circuit remanded another FERC pipeline rate order on the same issue - see "Courts," p. 22.)

OFFSHORE GAS PIPELINES. The Interstate Natural Gas Association of America has asked the FERC to restrict its jurisdiction for offshore natural gas pipelines, in comments filed under the commission's recent notice of inquiry, which asked for possible alternatives to the "primary function