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News Digest

Fortnightly Magazine - March 1 1999

Studies & Reports

Year 2000 Readiness. On Jan. 11 the North American Electric Reliability Council (NERC) predicted a minimal effect on electric system operations from Y2K software problems. The Department of Energy, which had asked NERC to run the electric industry assessment, added that 98 percent of U.S. and Canadian electric systems are participating in the NERC effort, and that more than 50 percent of "mission-critical" components had been tested by the end of December, the issue date for NERC's fourth-quarter report, "Preparing the Electric Power Systems of North America for Transition to the Year 2000."

Nevertheless, NERC will continue "to chase after" the 2 percent that aren't participating, according to Jerry Cauley, NERC's Y2K program coordinator. Cauley noted that NERC has compiled a list of every electric system provider (there are more than 3,000) and has listed those actively complying at the NERC website ( www.nerc.com). NERC will list nonparticipating companies "at a later date."

As part of remediation efforts, bulk electric operating organizations are drafting contingency plans, to be ready by the end of June. Two coordinated testing drills were planned for April 9 and Sept. 8-9. The latter date "9/9/99", has been known to crash some computers. For this reason, the date will serve as a dress rehearsal for the Y2K calendar rollover.

Energy Consolidation. The Washington International Energy Group's eighth annual survey of electric and gas industry executives, released Jan. 6, finds that retail choice is on hold. The report, "1999 Energy Industry Outlook," finds few customers making an effort to choose an electric or gas supplier. Instead, the report predicts an accelerating industry consolidation, mostly involving big multinational corporations, which WIEG says will dwarf even the biggest, most aggressive U.S. companies.

WIEG predicts that only 25 percent of existing U.S. companies will survive the move to competition, with more than half the industry choosing to remain in the distribution sector, because of its assumed monopoly status. However, for the first time in years, industry players are confident that nuclear power plants can operate competitively. WIEG also sees high confidence in natural gas. Contact WIEG at tel. 202-833-7159.

State Electric Restructuring. The Electric Power Supply Association now advocates stranded cost recovery for utilities, but only as netted against benefits (market price above book value), according to a recent report, "Retail Electric Competition: Getting It Right."

Nevertheless, EPSA does not advocate mandatory divestiture of generation assets, but believes divestiture can offer "important benefits," such as mitigation of market power. But EPSA warns that the divestiture auctions must be fair, with all potential buyers informed and able to bid.

Lynn Church, EPSA executive director, calls for standardization of the restructuring process across regions to reduce transaction costs. James Steffes, Enron director of government affairs, agreed, describing the pro forma supplier tariff used in Pennsylvania as "excellent." Contact EPSA at tel. 202- 789-7200.

State PUCs

Self-Generation, Net Metering. In its first official act after its creation at the start of 1999, the New Mexico Public Regulation Commission suspended the net metering rule issued on Nov. 30 by the former state

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