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News Digest

Mergers & Acquisitions
Fortnightly Magazine - May 15 2000

(MAPPCOR) concluded agreements to combine with the Midwest Independent System Operator.

The newly merged MAPP/MAIN regional reliability organization (RRO) would be organized to match structures envisioned in legislation proposed to restructure the North American Electric Reliability Council (NERC) as an "organization" (i.e., "NAERO").

Source & Sink Tagging. The electric industry is up in arms over Entergy's proposed "Attachment M" - an amendment to its transmission tariff that would require all customers to supply valid source and sink data for each grid transaction.

Entergy's proposal also would bar transmission customers from designating fictitious source and sink data, which occurs when customers string together two or more segmented power movements to achieve a complete transaction, a technique that allows transmission customers to hide the identities of energy buyers and sellers.

In their joint protest (one of many), Enron Power Marketing and ELCON (the Electricity Consumers Resource Council) argued that the North American Electric Reliability Council as a matter of policy has rejected Entergy's idea. Further, Enron and ELCON say that Attachment M would impose burdens only on point-to-point transactions and would deny commercial advantages enjoyed by competitors of Entergy and transmission-dependent utilities that operate within a load-only or a generation-only control area.

Studies & Reports

FERC's Self Review. In a report issued in March, "State of the Markets 2000," the FERC admitted that it needs better methods to evaluate market power in utility merger cases, and called for more performance measurement tools that can define the extent and quality of customer access to commodity and transportation markets.

At the same time, the commission released its annual performance report for fiscal year 1999 - the first one required under the Government Performance and Results Act.

Taken together, the two reports offer insights and admissions by the FERC of new realities in markets and policy: (1) it is locational differences in gas commodity prices, and not costs, that should drive prices for pipeline transportation; (2) gas price spikes seen in the winter of 1995-1996 most likely were caused by the inexperience of marketers and traders, rather than any policy defect; and (3) the commission has not yet figured out how to balance environmental concerns with other needs in gas pipeline certification cases.

Plant Construction. A report released March 13 by the staff of the California Energy Commission concluded that if eleven large power plants were put into service in the state between 2001 and 2003, available generation would take care of load growth for much of the decade.

But the report also suggested that wholesale electric prices would fall short of revenues needed to support the new plants - whether or not construction was spread out as far into the future as 2008.

Since over 40 plants are currently proposed for construction in California, with at least 19 serious candidates for completion, the study suggests that developers will need other alternative income sources, higher market prices, or lower plant costs than assumed under staff's analysis.

Fuel Mix. A study conducted by the Electric Power Research Institute found that under the "current policy," if future restrictions on