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News Digest

Fortnightly Magazine - January 15 2000

As decisions on building, maintaining and retiring generators increasingly are made by unregulated, for-profit corporations, regional reliability requirements will become secondary to profitability, according to a report from Oak Ridge National Laboratory.

That report, "Maintaining Generation Adequacy in a Restructuring U.S. Electricity Industry," by Eric Hirst and Stan Hadley, says that market-determined generation levels, relative to centrally mandated reserve margins, will lead to more volatile energy prices, lower electricity prices and a generation mix with more base load and less peaking capacity. The report also says that some customers will choose to face real-time (spot) prices and will respond to the occasional price spikes by reducing electricity use at those times. See

Mergers & Acquisitions

ScottishPower + PacifiCorp. PacifiCorp and ScottishPower announced the completion of their merger on Nov. 30 after receiving approvals from Wyoming and Utah in the prior two weeks.

* Utah. The state commission imposed 51 conditions, one creating a $12 million credit to customers for each of four years beginning in 2000, though the credit can be offset in the third and fourth years by proven savings produced by the merger. Docket No. 98-2035-04, Nov. 23, 1999 (Utah P.U.C.).

* Wyoming. The PSC opted not to address PacifiCorp's rates, saying they will be decided in other cases. "This is not a rate case but a merger case," the commission said. Docket No. 20000-EA-98-141, Nov. 17, 1999 (Wyo.P.S.C.).

Providence + Southern Union. Providence Energy Corp. and Southern Union Corp. on Nov. 15 announced a merger in a transaction valued at about $400 million, including assumption of debt. The transaction follows on the heels of the merger of Southern Union with Fall River Gas, which is being processed.

The latest proposal calls for Providence Energy shareholders to receive $42.50 per share in cash, and for Providence Energy to operate as an autonomous division of Southern Union with headquarters remaining in New England. No layoffs are anticipated.

NEES + National Grid. The New Hampshire PUC upheld an earlier ruling that OK'd the merger of New England Electric System and National Grid Group plc, but declined to act on motions to restrict the acquisition premium or to use the gain received by NEES shareholders on the sale of their company to offset stranded costs allowed to Granite State Electric Co., a NEES subsidiary. The PUC said that further action would be required before the premium could be included in rates. It added that it would examine stranded costs further in a case reviewing the divestiture of generating assets by NEES under state restructuring laws. DE 99-035, Order No. 23, 353, Nov. 29, 1999 (N.H.P.U.C.).

Allegheny ( West Penn. Pursuant to its 1998 settlement agreement on restructuring, Allegheny Energy on Nov. 16 announced it would sell its Pennsylvania-based subsidiary, West Penn Power, for $600 million in transition bonds to help form an unregulated generating subsidiary - said to be the foundation of its long-term growth strategy.

The company will use the bonds to securitize a portion of the transition costs associated with the move by West Penn Power to a competitive