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News Digest

Fortnightly Magazine - November 1 2000

innovative rate structure will set transmission rates equivalent to the transmission component embedded in the bundled retail rates of the former vertically integrated utility, thus essentially freezing transmission rates until 2006, when a state-mandated freeze on retail electric rates would be lifted.

The FERC decided that if ITC should fail to become independent of Detroit Edison within 24 months and does not join an approved RTO by Dec. 15, 2001, then it must pay refunds with interest on all transmission service provided under the new rates. ITC, a member of the proposed Alliance RTO, agreed not to challenge a FERC order assigning it to an RTO of the FERC's choosing should it fail to satisfy the RTO commitment. .

Midwest Membership Shuffles. Illinois Power announced on Sept. 20 that it would withdraw from the Midwest Independent System Operator to join the for-profit Alliance Regional Transmission Operator, saying it wanted to align the company with other utilities with more experience with deregulation.

"[The fact that many members operate in retail choice states] alone makes the Alliance RTO a better tool to help promote competition in Illinois," said Kathy L. Patton, Illinois Power vice president and general counsel. "Our decision was also influenced by other benefits provided by the Alliance RTO, including price certainty and the elimination of stacked or 'pancaked' rates. Furthermore, as a for-profit entity, the Alliance RTO has the incentive to move power economically, efficiently, and effectively."

The MISO charter allows for member withdrawal if ownership of the transmission assets changes_a requisite met by the February merger of Illinova Corp., Illinois Power's former parent company, and Dynegy Inc.

The next day, Sept. 21, the MISO board OK'd three new applicants for ISO membership as non-transmission owner members: Indeck-Rockford LLC, an exempt wholesale generator, and power marketers Conectiv Energy Supply Inc. and Tenaska Power Services Co., bringing to 28 the number of non-transmission owners participating in MISO.

NY Cash Infusion. The New York PSC--giving the matter emergency treatment--OK'd an additional $38 million in working capital for the New York ISO in the form of revolving credit, boosting the ISO's total line of credit from $12 million to $50 million. The PSC also OK'd a bridge loan that will provide working capital until the revolver has been implemented.

"[U]nless the credit facilities are approved quickly, the NY ISO may not have enough cash on hand to pay its bills," the PSC said. .


Power Markets

Cost-Based Re-regulation. The California Municipal Utilities Association asked the FERC to re-impose traditional cost-based rates on everyone selling into California's wholesale power markets.

CMUA would have the FERC suspend market-pricing mechanisms by the California Power Exchange and Independent System Operator, on the grounds that wholesale power markets in California are not sufficiently competitive to rely on competition as a substitute for a "just and reasonable" rate, as required by the Federal Power Act.

"Some may argue that 'the toothpaste cannot be put back into the tube,'" said the group. "CMUA does not discount the difficulties ... but asks, 'Difficult compared to what?'" .

Virtual Trading. The FERC