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Fortnightly Magazine - February 1 2000

News Analysis

Lori A. Burkhart

California has a plan to track green electricity, but can it be trusted?

All electricity is the same, but the California Energy Commission wants to change that. It plans a system to authenticate the source of electricity to allow consumers to buy power from specific generators. Standard documents called "Certificates of Specific Generation" would certify financial transactions. Presumably, the plan would help document the authenticity of non-generic electricity products, such as green power.

Off Peak

Regina R. Johnson

Electric utility stocks bottomed out in 1999. It's up to managers to lead a rally.

The allure of technology stocks and rising interest rates combined to make 1999 the worst year for electric utility stocks since 1974, according to market analysts. But they see upside potential in the under-performance of these stocks, and say utility managers can play a role in attracting investors.

The Power Market: E-Commerce for All Electricity Products

Edward G. Cazalet, Ph.D., and Ralph D. Samuelson, Ph.D.

Why not use the Web to buy and sell transmission rights at prices derived from bids and offers?

You make an offer, I accept. You deliver a product, I deliver money. This simple construct works well in just about any industry you can name. When a willing buyer and seller negotiate a contract, each achieves an outcome he considers best. Moreover, each is obliged to meet the needs of the other - reliably. No central authority sets the price or allocates supply. We depend on markets for reliable production and delivery of other essential goods; why not for electricity?

Rethinking Asset Values in a Competitive Environment

Rajat Deb, Ph.D.

Power plants can bid on more than one product. That's why most spark-spread studies miss the mark.

Forward energy prices can make it look easy to place a value on a power plant. Yet something is missing. Plants can sell more than one product. One price may be up while another is down. As Einstein said, a theory should be as simple as possible, but no simpler.

That is why it is worth reexamining the methods commonly used to calculate forward price curves and estimate the expected revenues and profits of generating assets.

Frontlines

Bruce W. Radford

Some in California say they will pay double - once to the ISO, then again to the IOU.

What if power prices fall but the savings get eaten up by higher transmission rates? Let's say we unbundle the wires, but end up creating just another layer of costs? We pay the independent system operator (ISO) to run the grid, but the investor-owned utility (IOU) still owns the wires. It has its own costs to recover. So now we pay two bills, right?

The issue is troublesome for California's electric utilities and a quagmire for Pacific Gas & Electric Co. In a new tariff it filed on Nov.

People

Reliant Energy's Don D. Jordan retired from his position as chairman of the board Dec. 31. R. Steve Letbetter, who had served as president and chief executive officer since June, has been named chairman, president and chief executive officer. Jordan served as CEO of Reliant Energy and its predecessor companies for 23 years, one of the longest tenures as a chief executive among major companies in Houston and in the energy business.

Matthew C. Cordaro has been appointed president and CEO of the Midwest Independent Transmission System Operator.

News Digest

Carl J. Levesque

Agency moves ahead despite ruling that Clean Air Act is unconstitutional.

By granting petitions filed by four Northeastern states seeking to reduce ozone pollution in their geographic areas through reductions in nitrogen oxide emission (NOx) from out-of-state sources, along with other initiatives, the Environmental Protection Agency on Dec. 17 began to clean the regulatory air that has grown murky as of late.

Mail

Jodie Bernstein

Director agrees, the Fortnightly doesn't get it.

In your Oct. 1, 1999 editorial regarding green power marketing, you stated that "the FTC would leave consumers in the dark on some environmental claims." (See "We Got Green?" Public Utilities Fortnightly, p. 4.) After reading your observations, we here at the FTC are in the dark as to why you believe that retail power marketers should be required to give consumers information that would shed no light on their purchase decisions.

Perspective

Trevor R. Roycroft, Ph.D.

In fending off the special interests, Congress spawned new inequities.

The fourth anniversary of the Telecommunications Act of 1996 most likely will be celebrated with more groans than cheers. The law set out to create "a pro-competitive, deregulatory national policy framework designed to accelerate rapidly private sector deployment of advanced telecommunications and information services to all Americans by opening all telecommunications markets to competition,"[Fn.1] but that objective has not been fulfilled.