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News Digest

Fortnightly Magazine - May 1 2001

Energy Group, but only after the companies agreed to divest certain natural gas assets to Exelon. The case marked the first time the FTC had challenged a merger between gas and electric utilities because of possible anticompetitive effects, on the theory that natural gas and electricity service are substitutes for each other because of the outlook for growth of gas-fired distributed generation.

To win FTC approval, the merger partners agreed to grant an easement allowing Exelon to gain access to MCN's gas distribution system to market natural gas and introduce competition in the geographic area in which MCN's otherwise exclusive gas service territory overlapped with DTE's exclusive electricity distribution territory.

Otherwise, the post-merger company would have controlled all gas and electric distribution service within the overlap area. File No. 001-0067, Mar. 22, 2001 (F.T.C.). (em L.A.B.

Rotating Blackouts. California took steps to ease the hardship from electricity outages by allowing customers of Southern California Edison to "opt out" of interruptible tariffs and by exempting certain essential services from rotating blackouts, including fire protection, police, prisons, government agencies needed for national defense, and hospitals (above a certain size and regardless of availability of backup or standby generation).

The PUC justified the opt-out permission by noting that the electric system was operating "outside any reasonable bounds, or any realistic assumptions" that customers could have been expected to make regarding terms of service.

Exemptions from rotating blackouts were also extended to communications utilities, fuel and fuel transportation services critical to electric power system operation, navigation communications systems, traffic control, commercial air and seal control operations, rapid transit facilities used to protect public safety, and radio and television emergency broadcasting. Decision 01-04-006, R. 00-10-002, Apr. 3, 2001 (Cal.P.U.C.). (em P.C.

Retail Electric Choice. Favoring the shortest possible phase-in for electric supply competition, Virginia OK'd a "flash cut" startup date of Jan. 1, 2002 for retail choice for Delmarva Power & Light, AEP Virginia, and Allegheny Power.

It rejected a complaint from Virginia Power that the new schedule would amount to an "acceleration" of retail choice not allowed under the state's electric restructuring law, which otherwise requires the phase-in of electric competition to begin by Jan. 1, 2002 and be completed by Jan. 1, 2004. Virginia Power is set to phase in retail choice over a one year period ending Jan. 1, 2003. Case No. PUE000740, Apr. 2, 2001 (Va.C.C.). (em P.C.

Residential Rate Hikes. California assessed an emergency surcharge of 3 cents per kilowatt-hour on residential electric customers of Southern California Edison and PG&E, boosting the average total bill for consumers by 28 percent and promising $2.5 billion per year in added revenue for each utility.

To mitigate the impact on residential consumers, and to encourage energy conservation, the PUC withheld the surcharge from any usage less than 130 percent of the "residential baseline allowance. (The allowance is equal to about one-half of the average monthly residential electricity use.)

The PUC said also that it would adopt a tiered approach that would allocate the surcharge at different rates to various usage levels, as a benefit to