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News Digest

Fortnightly Magazine - September 15 1999

1999 (Cal.P.U.C.), petition for rehearing filed July 12, 1999.

Water Utility Returns. Saying it could no longer use gas industry data as a reasonable proxy for the water utility business, the Florida PSC eliminated the gas utility index and gas risk premium models from its formula for calculating return on equity for water and wastewater utilities.

It set ROE for water utilities at 8.14 percent, with a cap at 10.12 percent for all companies with an equity ratio below 40 percent to discourage imprudent financial risk. Docket No. 990006-WS, Order No. PSC-99-1224-PAA-WS, June 21, 1999 (Fla.P.S.C.).

Mergers & Acquisitions

AEP + CSW. Denying a motion to move straight to a final commission order, the FERC instead set a deadline of Nov. 24 for administrative law judge Joseph Nacy to issue an initial decision on the proposed merger between American Electric Power and Central & South West Corp., implying no final FERC action until next year. The next day, Judge Nacy said he would issue a single decision disposing of all related issues, including other dockets that involve the reasonableness of transmission tariffs and proposed system integration agreements filed by the merger partners.

Commissioner Vicky Bailey questioned whether the deadline was quick enough: "I am not enthused with the prospect of commission action next year, even with the pledge [for] action in February or March.

"I certainly understand the complexity of the issues raised and the tenacity of the intervenors ¼ [b]ut I do not view the case as so complex as requiring commission action only after close to two years of review ¼ especially ¼ now that the applicants have entered into negotiated stipulations with [the] trial staff." Docket Nos. EC98-40 et al., July 28, 1999, 88 FERC ¶61,121.

Chugach + Matanuska. Members of Alaska's Chugach Electric Association will vote Nov. 18 on whether to sell out to the Matanuska Electric Association. The two co-ops have been fighting since 1994, when Matanuska first bid for the larger Chugach system, which is based in Anchorage.

Matanuska originally had claimed that it could cut costs by as much as $200 million over 25 years by taking over Chugach (which supplies power to Matanuska) - mostly through debt reductions and economies of scale. However, Chugach lately refinanced some debt, lowering estimates of cost savings on consolidation.

NEES + National Grid. Vermont OK'd the takeover of New England Electric System (NEES) by National Grid Group plc. The board noted that National Grid "may be able to bring experience to the region to assist NEPOOL and ISO New England in providing the infrastructure dispatch and power exchanges necessary for an efficient power supply market." The board also noted that the merger could enhance the ability of NEES to attract capital to fund grid enhancements. Docket No. 6225, June 15, 1999 (Vt.P.S.B.).

Studies & Reports

Natural Gas Projections. The Gas Research Institute identifies a "robust 2 percent annual growth" as a baseline projection for natural gas markets in a new study that tests the projection under five "what if" scenarios. For instance, what would happen if technological innovations