Utility executives face volatile energy markets, skyrocketing fuel prices, and changing federal energy policies. How are utilities benefiting from the turnaround in energy trading?
An Arizona appeals court ruled that when the state PUC unbundled rates for Arizona Public Service Co., and set standard offer rates for regulated distribution service over a future locked-in 4-year period, to effectuate retail choice, it did not have to conduct a new rate case to recalculate fair value, despite the utility's plans to divest certain generating plants.
The court ruled that future market value of power purchased on the open market after plant divestiture was likely equivalent to the fair value of divested generating plants (plus stranded costs).
"Because the cost of the generation assets will be replaced by the corresponding expense of purchasing power, rates of return will not be affected significantly," said the court. Ariz. .-B.W.R.
District Heating & Cooling. Reversing a $20 million trial verdict for antitrust damages, a federal appeals court ruled that state rate regulation afforded immunity for Oklahoma Gas & Elec. Co. against allegations by a local subsidiary of Trigen Energy that the utility made improper payments to public officials and offered discounted loans and construction cost guarantees to entice certain energy customers to install on-site chillers instead of relying on Trigen's district heating and cooling services, which offered delivery of steam and chilled water through a local pipeline distribution network. -B.W.R.
Pipeline Certification. The FERC spent only three weeks between date of application and decision to grant fast-track approval to the Kern River Transmission Co. to build new facilities to deliver 135,000 Mcf per day of natural gas to California from Wyoming this summer. .-L.A.B.
Gas-Fired QFs. In accusing the California PUC of violating the Public Utility Regulatory Policies Act (PURPA), the California Cogeneration Council asked the FERC to "provide guidance" to the PUC to convince the PUC to reverse its late March ruling (), whereby it switched to using the lower Malin index price for natural gas (at the California-Oregon border), instead of the much higher-priced Topock index (Arizona border) to calculate short-run avoided costs (SRAC) in setting rates for electricity sold to utilities by qualifying cogeneration and small power production facilities (QFs).
According to the Council, the PUC order violates PURPA by denying recovery of actual avoided costs, since the Topock/Malin price differential exceeded $4 per dekatherm in March, and was "likely" to exceed $5 in April, while only a small portion of gas serving southern California QFs comes from Malin.
The PUC ruling does allow an SRAC adder for in-state gas transport costs from north to south, but the council dismisses any notion that southern California QFs can acquire Malin gas.
"If gas could flow freely from either point [Topock or Malin] into the California market, the two prices would be very similar," says the council. But it adds that because supplies at Malin are less expensive than Topock, "PG&E's pipelines that move gas south from Malin are often full. Firm capacity on PG&E's ÔRedwood Path' south of Malin has been sold out since 1998." .-B.W.R.
Phantom Stranded Costs. The Texas House State Affairs Committee introduced a bill (H.B. 2107) which, if enacted, could force three