When a capital-intensive industry enters an asset-building cycle, many companies will operate in the red for a few years or more. That’s not necessarily a bad thing, as cap-ex investments...
Transmission & ISOs
Return on Equity. The FERC upheld a 10.56 percent return on common equity approved by an administrative law judge (ALJ) for electric transmission service provided by New York State Electric & Gas Corp., even though the ALJ relied on the same two-stage method for estimating dividend growth (commonly applied in gas pipeline rate cases) that the commission rejected in the Southern California Edison case in late July as inappropriate for the electric industry, and where it set a higher return of 11.6 percent.
It said that the 10.56 figure was acceptable for NYSEG because it fell within the reasonable range that would have emerged had the ALJ used the preferred method. .
QF Power Purchases. In a transmission rate case, the Federal Energy Regulatory Commission ruled that Niagara Mohawk had failed to justify a rate allowance for expenses it paid to qualifying cogeneration facilities (QFs) to cover so-called "avoided transmission costs," after the New York PSC had OK'd that item as an element of purchased power rates owed to QFs under the Public Utility Regulatory Policies Act (PURPA).
The FERC implied that the NY PSC had violated PURPA by adding such costs to QF rates, but said it would not rule on the point, since the NY decision was not at issue in the federal case. It then added that even if the state PSC had erred, that would not require disallowance. Instead, it explained that Ni-Mo had offered no evidence on why cost of purchased power should be recovered through transmission rates. .
Congestion Contracts. Morgan Stanley Capital Group asked the FERC to postpone an auction planned by the New York ISO to sell long-term transmission congestion contracts (TCCs), for contract terms running between two and five years. The investment firm claimed it was too early to allow such long-term contract commitments, since the ISO had not yet filed its report to the FERC on various software problems, market imperfections, and charges of bid and price manipulation raised earlier in the summer in various cases pending before the commission.
The complaint asked the FERC to limit the terms for TCCs to six months-the same term that applied to most TCCs sold in a prior auction in April. Said Morgan, "Incredibly, NY ISO plans to sell long-term TCC commitments in a market place that the FERC views as transitional, flawed and marked by uncertainty." .
Imbalance Charges. New Horizon Elec. Co-op., an importer of energy and capacity, asked the FERC to rule on whether a transmission provider can bill a customer for energy imbalance service whenever the customer's actual load deviates from scheduled load, even though the customer buys power from a remote supplier and uses dynamic scheduling to switch dispatch control to the control area operated by the remote supplier. .
Black Start Service. To comply with a prior FERC order, the New England Power Pool filed a tariff for "black start service"-system restoration and planning service (SRPS)-which bills transmission customers only through a monthly charge allocated on the basis of respective network load, internal