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News Digest

Fortnightly Magazine - November 1 1998

examines state and federal regulations for both electric and gas utilities, plus environmental laws and technology issues. Address questions or GRI's Chicago office at fax (630) 406-5995, or to Val Megginson (703) 526-7832; fax (703) 526-7808; or e-mail:

GENERATING FUELS. According to a new report by the DOE's Energy Information Administration, Challenges of Electric Power Industry Restructuring for Fuel Suppliers, electric utility restructuring could force cost cutting and consolidation in the coal industry, which now fuels 56 percent of utility power generation, representing 87 percent of all domestic coal consumption. The EIA adds that the share of nuclear-fired capacity (21 percent of domestic generation) will likely decline, along with the share for renewables (other than hydropower), making way for more gas-fired capacity, putting pressure on gas prices. See the EIA's Internet site at:

CONSUMER AWARENESS. Branko Terzic, just before stepping down as chairman, president, and CEO of Yankee Energy Systems, Inc. on September 10 released the results of the third annual survey of consumers perceptions on deregulation, commissioned by Yankee Energy System through its subsidiary, Yankee Gas Services Co., and carried out by ICR Survey Research Group.

The number of U.S. citizens aware of deregulation has increased from 22.9 percent in 1996 to 38.1 percent at present. But as Terzic pointed out, "more surprising to us on the policy level is that six out of ten Americans are not aware." Respondents were almost evenly split over whether electric and gas deregulation would benefit them. A majority of respondents (60.6 percent) either did not know of any benefits (30.8 percent) or thought there would be none (29.8 percent). But more Americans felt this year that electric deregulation would lead to lower rates (46 percent) than they did two years ago (37.8 percent).

Significant regional differences surfaced in consumer awareness (highest in the West, lowest in the South), reflecting restructuring activities in those areas. According to Terzic, consumer awareness is directly related to publicized activity within the state.


INDUSTRIAL ELECTRIC RATES. A North Carolina appeals court, affirming a state commission ruling, has denied a request by a ratepayer advocacy group to investigate whether Carolina Power and Light Co. was earning returns above authorized levels since the utility's last rate case, decided in 1998, which set return on equity at 12.75 percent. It ruled that passage of time after a utility's rate case, standing alone, does not require a rate review. It added that uncertainty over electric restructuring "will tend to drive up the return expectations of investors," and also noted a warning from the commission staff that new rate investigation could backfire, leading to unintended rate increases or rate realignments detrimental to non-industrial customers. N.C. Utils. Comm'n v. Carolina Industrial Group for Fair Utility Rates, No. COA97-498, 1998 WL 548961, Sept. 1, 1998 (N.C.App.).

DSM COSTS. Reversing a circuit court order, the South Carolina Supreme Court has overturned a decision by the state public service commission that had allowed Piedmont Natural Gas Co. in 1995 rate case to annualize and recover expenses for demand-side management that were incurred after