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News Digest

Fortnightly Magazine - March 1 2001

with ISO proposals for allocation of firm transmission rights (FTRs). . -B.W.R.

Michigan Divestiture. The FERC allowed CMS Energy Co. and its operating subsidiary, Consumers Energy, to transfer transmission assets to a newly formed company, Michigan Transmission Co., to carry out possible plans to turn over the assets to the proposed Alliance RTO, or to exit the transmission business entirely. . -L.A.B.

GridFlorida Governance. The FERC issued preliminary findings on whether GridFlorida's governance structure will satisfy requirements for regional transmission organizations (RTOs), with respect to (1) selection of the board of directors, (2) criteria for qualification of directors and officers, and (3) restrictions on financial holdings and independence of directors and employees. - L.A.B.

Return on Equity. The Texas PUC set return on equity at 11.25 percent for electric transmission and distribution utilities, once retail choice begins Jan. 1, 2002. It also issued revised draft rules governing rates, terms and conditions of wholesale and retail transmission service, to mesh with a new market design for the ERCOT ISO. . -L.A.B.

State PUCs

Price Caps for Rate Contracts. Citing extreme power price volatility in the Pacific Northwest, the Washington state commission ruled that retail electric rates billed by Puget Sound Energy (PSE) under Tariff Schedule 48, and in private contracts with various large customers, including Boeing, Georgia-Pacific, and Air Products and Chemicals Inc., were unjust and unreasonable, to the extent they were pegged to wholesale price indices reflecting prices at the Mid-Columbia hub, and to the extent that such customers did not have effective rights to achieve price stability under optional pricing guarantees and rate collars offered in the contracts, but which the commission cited as "inadequate."

The commission ordered further proceedings to set a "temporary soft cap," but declined to set a specific price target. Instead, it asked its staff to study and propose at least one optional solution that would include a soft cap at $150/MWh, and suggested a billing floor as well to protect PSE from risk. .-B.W.R.

Shopping Credits. New York OK'd a market-based shopping credit (back out credit for generation supply) for New York State Elec. & Gas, with an added credit of $0.004 per kilowatt-hour (kWh) tacked on the top to reflect retail marketing costs avoided by the utility for residential customers who switch to competitive suppliers. It decided against imposing any ceiling or floor as inconsistent with the market-based concept. NYSEG's current credit had been 3.56 cents per kWh, net of gross receipts taxes. . -B.W.R.

Capacity Contract Buyouts. Calling the deal a "serious gamble" that could backfire against consumers, Connecticut regulators rejected a proposed buyout of 345 MWs of capacity rights owned by Connecticut Light & Power under long-term purchased power contracts with a private power producer at prices supposedly above market, even though the buyer, Constellation Power Source, was selected as the highest bidder among some 15 bidders in a private auction conducted by J.P. Morgan.

The sale was held to mitigate CL&P's liability for stranded costs-CL&P would tender a "support payment" to Constellation for taking the contracts off its hands. But the commission