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News Digest

Fortnightly Magazine - September 1 1998

more than double their consumption of natural gas through 2015 - a growth of about 4 quads. The 1997 figure for electric generation is 2.9 quads, compared with a projected 6.9 quads in 2015.

NUCLEAR CREDIT QUALITY. According to a new report from Moody's Investors Service, U.S. investor-owned utilities with nuclear generating assets may find their credit quality improving as they restructure in response to deregulation.

According to Restructuring Reduces Fallout From Deregulation for Nuclear Utilities, there now is a "glimmer of optimism" for the future of nuclear utilities. Over the last 18 months, Moody's has upgraded the bond ratings of 12 nuclear operating utilities, while downgrading seven. During that same period, upgrades of non-nuclear utilities versus downgrades numbered five to four. According to Moody's Senior Vice President Mo Ying Seto, the improved ratings are due to decisions by some nuclear utilities to divest their generating assets. That includes the decision to divest traditional generating plants in exchange for stranded cost recovery. Stranded cost investments rendered uneconomic in an open market have tended to be significant because of high costs of constructing, operating and maintaining nuclear generators.

Nevertheless, Moody's has downgraded the credit ratings outlook for Illinova Corp. and its subsidiary Illinois Power Co. from stable to negative, based on a July 6 announcement that costs for replacement power and operations and maintenance for the off-line Clinton nuclear power plant will come in higher than originally forecast, as a 15-percent rate cut in August imposed additional cash-flow pressures on Illinova.

DISTRIBUTED GENERATION. A new Frost & Sullivan report, North American Generators Set Markets, finds substantial interest in distributed generation, with commercial and industrial businesses purchasing such systems for emergency backup power or for cogeneration. The report looks at diesel and gas-fired reciprocating engines, combustion turbines of 500 kW to 10 MW, and microturbines from 20 kW to 500 kW. It provides revenues forecasts, market share, technological trends, competitive issues and strategies. (For more information, see www.frost.com.)

Power Markets

SERVICE TERRITORY SALES. PacifiCorp on July 9 announced that it was considering selling its electric service territories in two of the seven states where it operates - California and Montana - which makes up about 76,000 of its 1.4 million customers (5.5 percent).

PacifiCorp said the move was based on the evolving competitive climate making it increasingly complex to do business in seven states. PacifiCorp plans to begin accepting bids this summer. "These are sound service areas which would represent a real added value for a number of potential purchasers," said PacifiCorp CEO Fred Buckman. "However, we believe these are valuable properties and if we do not receive credible offers, we will continue our ownership."

Courts

TELECOM ACT ARBITRATIONS. A federal district court judge has ruled that a new competitive telephone carrier may sue a state utility commission (or individual commissioners) if aggrieved by a state PUC arbitration order issued under sec. 252 of the 1996 federal Telecommunications Act of 1996, which requires incumbent carriers to interconnect with new entrants to speed up competition. The judge said the suit was not barred by