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Fortnightly Magazine - March 1 2000

News Digest

STATE PUCS

Distributed Generation. In December and January the Illinois commission took comments from utilities, marketers, manufacturers, and trade and advocacy groups on how to develop policy on distributed generation.

* Rulemaking Strategy. Enron has urged the state to proceed in a fashion similar to the California PUC's

two-track investigation. It asked for two separate rulemakings on (1) interconnection standards for DG installations of 50 megawatts or less, and (2) rate design and operational issues.

* Unit Size Limits.

News Analysis

Carl J. Levesque

They see leasing and dark fiber as "no-risk" ventures, with more upside potential.

Few seem ready to predict when demand might wane for rights-of-way for long-haul telecommunications. The consensus suggests a long-lived market - with interstate natural gas pipelines primed to take advantage. The question seems not so much whether to dive in, but how deeply to get involved.

Should pipelines stick to leasing rights-of-way to carriers? Or should they lay fiber and perhaps offer their own long-haul services?

Off Peak

Courtney Barry

While Texas ponders how best to help rural co-ops move to electric competition, some interests question whether bailouts are needed at all.

Big Fish, Little Fish

"The co-ops are like a school of little fish, all right? And there's a school of big fish out there who are going through and taking munches, okay? And if the little fish aren't protected, the big fish will eat them."

- Former ERCOT representative, on the fate of Texas co-ops

"Lots of co-ops that serve very rural remote areas [may] not see a lot of difference¼.

Gas-Electric Mergers: Money Well Spent?

Richard Stavros

The top traders, investors and managers tell why energy convergence is still a pipe dream.

[Graphic tables included in the print version of the Fortnightly are not included in this electronic version.]

Energy investors seemed less willing in 1999 to greet electric/gas combination mergers with the kind of blind enthusiasm they tended to show in prior years.

Instead, they now demand proof that energy convergence really does create tangible value beyond the mere sum of the parts. At least that's the impression gained from talking with John W.

When the Merger Doesn't Work: Saved by a Spin-Off?

Richard Stavros

Some partners turn to the quick sale to raise capital and dress up performance.

Analysts cite several reasons why energy companies might wish to execute a spin-off:

* To cover a failed merger,

* To raise cheap capital, or

* To boost valuation of a diversified company.

In fact, many newly merged energy companies will fit into this last category. No longer just power companies, they now own merchant generation, transmission, pipelines and telecommunications assets.

Firm Transportation Contracts: When They Expire - A Five-Step Primer for Pipeline Shippers

Bruce W. Radford

An interview with David A. Boger, Stephen D. Moritz and Joseph G. Baran of Strategic Energy Ltd.

The expiration and renegotiation of firm transportation contracts on the pipelines in North America is becoming increasingly complex. For example, TransCanada Pipeline ("TransCanada") in the past consistently renewed its expiring contracts for five- to 10-year periods at maximum rates. It also regularly expanded its capacity, requiring 10-year commitments two years in advance of availability.

A Subtle but Clear Preference for ISOs

Jeremiah D. Lambert

Do not mistake the FERC's professed neutrality on what works best for regional transmission organizations.

In its final rule on regional transmission organizations, known as Order 2000,[Fn.1] the Federal Energy Regulatory Commission said it would not dictate to the electric utility industry whether and how to form RTOs. Don't be misled. The FERC claims to be agnostic,[Fn.2] but it still has a vision. And that vision leads inexorably to one conclusion. The preferred form for an RTO is the independent system operator, or ISO.

Exposing Myths on what the FERC Really Wants

Curt L. Hébert Jr. and Joshua Z. Rokach

Read the RTO Rule. You'll see that it paves the way for transcos.

On Dec. 20, the Federal Energy Regulatory Commission hit the streets (both Wall and Main) with Order 2000, its rule on regional transmission organizations (RTOs). Ever since, utilities, investors and their advisers have been poring through the 727 pages of the document. They want to know, "What does the FERC really want?"

The question is not simply academic. On March 1 in Cincinnati, the FERC will open the first of five collaborative workshops to explore the RTO Rule and help the industry respond.

Frontlines

Bruce W. Radford

The Midwest ISO struck a deal with utilities from low-cost states, but it may backfire.

Why should low-cost states get excited about handing over a chunk of their utility assets to an independent system operator (ISO) or other qualifying regional transmission organization (RTO)?

They might buy in if the ISO offers enough of an incentive.

People

The National Association of Regulatory Utility Commissioners appointed James Bradford Ramsay its general counsel. Ramsay's career at NARUC began in 1990. He previously served as a rates attorney with the Federal Energy Regulatory Commission.

Chris Duhon, the former president of Houston-based Additech Inc., was named vice president and general manager of GRI's pipeline business unit.

Michael R. Peevey, founder and chairman of NewEnergy Inc., resigned in January. His company previously was called New Energy Ventures.

Commonwealth Edison Co. appointed Nicholas J.