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News Digest

Fortnightly Magazine - March 1 2001

ruled the deal a bad bargain for ratepayers, who would fail to break even if power prices averaged above $30/MWh over the life of the contracts, and because CL&P would assume the risk to pay for the buyout even if the generator defaulted.

"Fixing stranded costs ... is not necessarily a benefit to customers," said the commission. "Stranded costs become less volatile, but ... if the average market price is above three cents per kWh over the thirty-year period, ratepayers will suffer. ... On the other hand, if the contracts are not transferred ... ratepayers will receive the actual market value of power." .- B.W.R.

Green Power Labeling. Texas proposed green power labeling standards for identifying generation supply by fuel mix (coal and lignite, natural gas, nuclear, renewables, or "other") and quantity and type of emissions (NO x, SO 2, CO 2, particulates, and spent nuclear fuel).

The proposed rules also create a "certificate of generation" as a tradeable instrument issued by power producers that specifies fuel and environmental attributes of power production from a specific generating facility during a particular time period. The PUC would appoint a program administrator to set up a registry of such certificates and procedures for trading certificates.

In a briefing paper explaining how the rule would work, the PUC listed some of the assumptions standing behind its certificates program:

  • "Green" electricity products will sell at a premium.
  • Electricity generated from Texas natural gas is "green."
  • "Bragging rights" to natural gas generation will have market value.
  • The "green premium" associated with natural gas generation can create a stream of economic benefits.
  • Retail electric providers that proactively prove they are "greener" than average simultaneously prove that their non-proactive competitors are "browner" than average. Project No. 22816, Jan. 23, 2001. -B.W.R.

Rate Freeze Avoidance. With two commissioners issuing lengthy dissenting opinions, North Carolina allowed Carolina Power & Light to defer costs incurred to purchase SO 2 emissions allowances until 2005-that being the end of a rate freeze accepted earlier by CP&L as a condition of its merger with North Carolina Natural Gas.

Dissenters Jo Anne Sanford and Sam J.Ervin IV decried the attempt to circumvent the freeze as without cause. .-B.W.R.

Price-Cap Regulation. In a victory for the utility on remand from the state supreme court, Massachusetts agreed to trim back the maximum penalty for poor service quality under a performance-based rate (PBR) plan OK'd earlier for Boston Gas, and to reduce the productivity offset against inflation from 1.5 percent to 1.0 percent.

The commission affirmed a half-percent "consumer dividend" it had included in its productivity offset to capture expected future productivity gains of the PBR plan. But it trimmed back its original "accumulated inefficiencies factor" from 1.0 percent to 0.5 percent, on orders from the court.

It had designed the AEF to track historic inefficiencies in regulated versus competitive firms, mirrored on a similar adjustment it imposed several years earlier in a telephone price cap plan for NYNEX, but on remand the commission acknowledged that using the telecommunications industry as a proxy for gas industry