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Fortnightly Magazine - October 15 1998

Price Forecasting in Spot Markets: Hidden Risks in Single-Part Bidding

Edward P. Kahn

The California Power Exchange doesn't solicit separate bids for plant start-up, spinning reserve or base load operation. That can make spark spreads a bit misleading

IT SHOULD COME AS NO SURPRICE THAT THE PROSPECT OF electric competition has created a huge demand for price forecasting services. To their credit, the forecasters have obliged, supplying an abundance of tools and techniques. Do the forecasts serve the needs of those who would use them?

Some might wish to use a price forecast to assign a value to assets.

Distributed Generation: A "Hot Corner" for Venture Capital?

Joseph F. Schuler Jr.

Robert W. Shaw JR. IS A BETTING MAN. Shaw's Aretê Corp. venture capital fund has invested $100 million in energy technology. This year the Center Harbor, N.H., fund set aside $30 million to invest in micro-generation technologies. Already the fund has pumped hundreds of thousands of dollars into more than a half-dozen companies trying to develop microturbines, fuel cells and other promising small-scale generation.

"This is a hot corner," Shaw says.

Shaw bucks naysayers like Ralph Selvig of VentureOne Corp., a San Francisco firm that tracks the venture capital industry.

Frontlines

Bruce W. Radford

"THESE ARE THE DOG DAYS OF DEREGULATION." That's how Federal Energy Regulatory Commission chairman James Hoecker put it last month in Houston at his luncheon talk at the Sixth DOE/NARUC National Electricity Forum. He bemoaned the "evidence of delay" in restructuring that now "clearly exists."

Don't be fooled. What Hoecker has up his sleeve is nothing less than a full-scale overhaul of FERC Orders 888 and 889.

People

The board of Ameren Corp. elected Charles D. Naslund assistant vice president, power operations. Naslund will help manage operation of the power plants of Union Electric, now known as AmerenUE.

The Texas Public Utility Commission named Saralee Tiede the new director of the Office of Customer Protection. Tiede will replace Bill Magness, who was chosen a year ago to direct the PUC's customer education and response program.

Chairman James J. Hoecker named David P. Boergers to the post of secretary of the Federal Energy Regulatory Commission.

News Digest

Bruce W. Radford

MARKING THE FIRST CASE of a voluntary agreement in a region not previously organized as a tight power pool, or compelled to act by state legislation, a group of 10 operating electric utilities won approval from the Federal Energy Regulatory Commission on September 16 to form the Midwest Independent Transmission System Operator, Inc., which will take over operational control of certain defined jurisdictional transmission facilities, provided that it complies with conditions imposed by the FERC.

News Digest

Lori A. Burkhart, Phillip S. Cross, and Beth Lewis

State PUCs

ISO GUIDELINES. Marking a contrast with California, but lining up with states in the Northeast, the Iowa Utilities Board has urged that independent system operators should have authority to order redispatch to help fulfill service requirements for electric transmission. That rule came as part of a set of principles issued by the board to guide the formation of ISOs in managing electric transmission systems and preventing the exercise of market power.

Perspective

James M. Costan

ONE OF THE thorniest issues that the Federal Energy Regulatory Commission has had to deal with in recent years is defining the scope of its jurisdiction over pipelines on the Outer Continental Shelf. Yet the solution is relatively simple and straightforward.

Fueled by the volatile combination of perceived statutory ambiguity and significant financial gains to pipeline owners, who can convince the Commission that their currently regulated facilities are in fact beyond its jurisdiction, the OCS controversy has raged for years.

Mail

Matthew T. McCabe

IN ACCORDANCE WITH OUR PREVIOUS DISCUSSIONS. we understand that the City of Alameda, Calif. and our municipal utility, the Bureau of Electricity are to be featured in an article to be published in your September edition. The article is being prepared by Mr. Len Grzanka, a local freelance writer, and is to discuss municipal telecommunications ventures. Based on recent staff discussions with Mr. Grzanka, we have some concern that Alameda's situation be represented accurately.

Off Peak

According to a telephone survey commissioned by the National Council on Competition and the Electric Industry, consumers are happy with their electric suppliers, but want the companies to improve their environmental records.

Many of the 1,307 adults surveyed also would like to see electricity prices improved. Two-thirds, in fact, think prices are too high.

Nearly all consumers (96 percent) feel it's important that electric companies be environmentally responsible. Some 92 percent say that preserving the environment is important, even if it costs more.

ISO Economics: How California Flubbed It on Transmission Pricing

Laurence D. Kirsch

Instead, let the ISO accept more imaginative bids for redispatch

IN THE TWO YEARS FROM MID-1994 TO MID-1996, CALIFORNIA undertook an intensive and acrimonious debate on how to set up its new competitive electricity market. The main issue was how much to centralize market decisions. Those favoring a relatively large role for an independent system operator emphasized efficiency and safe operation of the power system. Those favoring a relatively small role for the ISO wanted maximum freedom for market participants to strike power deals.