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Fortnightly Magazine - March 2004

People

New Opportunities:
We welcome submissions to People, especially those accompanied by a high-resolution color photograph. E-mail to: photos@pur.com

People

New Opportunities:

Allegheny Energy named Max Kuniansky director of investor relations. He previously held the position of vice president of investor relations for B/E Aerospace and investor relations specialist for FPG Group Inc.

Benchmarks

Strange bedfellows may provide a new supply option.
Brandon Owens

Benchmarks

Strange bedfellows may provide a new supply option.

Justifiable concerns associated with high natural gas prices have led analysts to consider the implications for new capacity development over the next decade. Expectations regarding the continued dominance of natural gas-fired units have begun to change. For example, in its , the U.S. Energy Information Administration (EIA) expects 112 GW of new coal-fired generating capacity to be constructed between 2003 and 2025-a 51 percent increase over EIA's 2003 forecast.

Perspective

Wisconsinites don't fear 'Day 2.' But let's get the grid rights right.
Robert M. Garvin

Perspective

Wisconsinites don't fear 'Day 2.' But let's get the grid rights right.

While working for the Wisconsin Public Service Commission (PSC), I have grown accustomed to the friendly advice frequently offered by regulatory colleagues and utility executives in higher-cost areas to the East.

Commission Watch

California anticipates changes in energy policy under its new governor.
Gordon P. Erspamer

Commission Watch

California anticipates changes in energy policy under its new governor.

The recall of California Gov. Gray Davis in November 2003 almost immediately led to speculation concerning possible changes in California's energy policy. Since his election, Gov. Arnold Schwarzenegger has assembled an Energy Working Group, co-chaired by Professor James L.

Business & Money

Can economies of scale make the industry more stable?
George W. Bilicic And Ian C. Connor

Business & Money

Can economies of scale make the industry more stable?

The recent Northeast Blackout framed for regulators and public policy-makers one of the central issues confronting the utility industry: infrastructure reliability and the significant capital investment requirements necessary for improvement. While estimates vary widely, some industry experts currently project that the investment necessary to revitalize and secure the transmission infrastructure in the United States may run in excess of $100 billion.

Technology Corridor

A digital grid to the home, secured via a local fiber-optic network, could position utilities to fix power and telecom together.
Steven R. Rivkin

Technology Corridor

A digital grid to the home, secured via a local fiber-optic network, could position utilities to fix power and telecom together.

Before billions are spent building new transmission lines to ensure reliable electric service, North American electric utilities should evaluate whether the alternatives-controlling demand and fostering distributed generation-might be more cost-effective and broadly beneficial.

Back to the Ratebase

BYLINE
Michael T. Burr

BYLINE

As a former independent power producer, George Lagassa is sympathetic to the woes of the merchant power industry. Until just a few years ago, he held the license to a micro-hydro qualifying facility (QF) in New Hampshire, so he understands what it takes to compete in a regulated-franchise industry. Yet, as the principal of Mainstream Appraisals in North Hampton, N.H., Lagassa is also a dedicated pragmatist. He sees the industry's consolidation trend as a sort of correction in the U.S. power market.

Capital Reserve Margins: Hardly Adequate

A pseudonymous executive tells why the CCRO's recommendations don't pass muster.
David Anthony

A pseudonymous executive tells why the CCRO's recommendations don't pass muster.

The latest splash from the Committee of Chief Risk Officers1 (CCRO)-a new white paper regarding capital adequacy for energy companies2-makes barely a ripple. While an improvement over the CCRO's previous efforts,3 the capital adequacy recommendations do not provide adequate standards that can be implemented consistently by energy companies.

Pricing Power in Whosesale Markets: A Risky Business

A Risky Business Utilities wrestle with how much to charge for their product.
Dr. Lawrence Haar

A Risky Business Utilities wrestle with how much to charge for their product.

The trading model has many good points, including the imposition of market discipline upon both transfer prices and prices to external third parties. Trading also encourages the use of resources and capital at their market value and the cultivation of specialized skills within different business units. But applying the model, particularly to the risks of power pricing, continues to be a challenge.

Retail Risk-Based Pricing

A new approach to rate design.
Gary Dorris and Sean Burrows

A new approach to rate design.

As energy markets have evolved in the late 1990s away from cost-based transactions to competitive market-based transactions, the exposure to market risks for the variable cost of supply has substantially increased.1 Reflected in these market risks are the diminishing reserves for North American gas supply, which has created conditions of extreme volatility in gas supply. The added market risk is compounded by the sensitivity of some retail load customers to weather conditions.

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