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Fortnightly Magazine - November 15 1998

Utility Marketing Affiliates: A Survey of Standards on Brand Leveraging and Codes of Conduct

Douglas N. Jones

No clear consensus has emerged. Should regulators hold to a hard line?

Regulators have wrestled for decades with transactions between vertically integrated monopoly utilities and their corporate affiliates.

Most problems have usually involved a shifting of costs, risk, or profit, as when an electric utility buys coal from a subsidiary. On the telephone side, AT&T's equipment dealings with Western Electric and Bell Labs were always a worry for regulators.

Missed Opportunity: What's Right and Wrong in the FERC Staff Report on the Midwest Price Spikes

Judah L. Rose

Contrary to findings, the conditions seen in June 1998 were not that unusual. And next year could promise prices even worse (em or, for the first time, real reliability problems.

The recent report by the staff of the Federal Energy Regulatory Commission on the causes of the power price spikes that occurred in the Midwest performs an important service (em it acknowledges that in competitive markets, the price of wholesale power can be quite high in periods of peak demand.

Nevertheless, the staff went wrong in reporting that the conditions behind the price spikes were unusual.

Right Power, Wrong Placel

Douglas M. Logan

Merchant plants should consider MAIN, other opening markets.

More than 47,000 megawatts of new capacity has been proposed in the United States within the next few years. A few thousand megawatts are proposed in Canada.

The totals are a fraction of the more than 180,000 MW of new capacity projected to be needed in the U.S. and Canada by 2010. Some 50,000 MW of new capacity is needed by 2002.

But the problem with the proposed capacity is that its geographic distribution doesn't match forecast need.

Frontlines

Bruce W. Radford

The FERC's latest idea throws pipelines for a loop, with implications for power markets, too.

Transmission and distribution (em the business they call "pipes and wires" (em can't last much longer with rates set by cost of service. Contrary to the myth, these services deserve no special status due to their high embedded costs. They carry no intrinsic value apart from the electrons and molecules they deliver.

People

Cheryl W. Gris´e was promoted to senior vice president, secretary and general counsel for Northeast Utilities and its subsidiaries. She replaces Robert P. Wax, who left NU to return to private law practice.

Houston Industries Trading and Transportation Group appointed Patrick J. Strange vice president, physical gas trading east division for NorAm Energy Services Inc. Strange joined the company in 1995, serving as director of gas trading.

DTE Energy Trading named Dowell Hudson director, business development and wholesale marketing.

News Digest

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

State PUCs

Electric Retail Choice. The Arkansas Public Service Commission has issued its final report on electric restructuring, citing a "broad" consensus favoring competition. It predicts immediate benefits for industrial customers, but warns that residential users likely will not see any quick rate cut. The PSC saw competition as consistent with action in neighboring states:

• Oklahoma. State law mandates retail choice by July 1, 2002.

• Mississippi. PSC plan would phase-in competition from 2001 to 2004.

• Missouri.

Perspective

Billy Ray

Glasgow, Ky. power chief takes Fortnightly to task.

"The great obstacle of man is the illusion of knowledge," says Daniel Boorstin, distinguished American historian and Librarian of Congress emeritus.

It is what we think we know that keeps us from making progress toward discovering new certainties. The electric utilities of today have a lot in common with the sailors who accompanied Christopher Columbus.

News Analysis

Carl J. Levesque

Hurdles loom in 10 states eyeing deregulation.

Lawsuits and delayed deadlines. A "go slow" approach and more studies. Stranded cost debates and commission reports that make recommendations but avoid concrete action.

With a new wave of states addressing electric competition, these are a few of the themes that have emerged in 1998. In most states, the process has been slow, though the start of competition does, in fact, appear closer in many.

Off Peak

Report answers the sticky question: Where'd it go?

Subsidies. It's a word that prompts finger pointing from all directions in the energy industry. Now a new study, Federal Incentives for the Energy Industries, has uncovered which sources of energy (em not which type of provider (em received the most federal dollars over the past 50 years.

But don't expect the finger pointing to stop.

Management Information Services Inc., a Washington, D.C. economic and research consulting firm, found that federal subsidies over the past five decades totaled $564 billion in 1997 dollars.

The 1998 Utility Regulators Forum Four States, Eight Views: Looking Back on Deregulation

Joseph F. Schuler, Jr.

Policymakers reflect on how it "coulda been." Nearly all insist "my state did it best."

California, Massachusetts, New Hampshire and Pennsylvania have deregulated their electricity markets. Yet they're all ironing out wrinkles. California at press time was bracing for a vote on the Proposition 9 recall petition. New Hampshire still faced federal lawsuits filed by Public Service of New Hampshire seeking to quash efforts to bring competition to the state. (See, U.S. District Court, Concord, Docket No. 97-97-JD; U.S. District Court, Providence, Docket No.