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Fortnightly Magazine - December 2005

How to Tango With a Regulator

Utilities and financiers want ratepayers to fund the next wave of power plants. Will higher electric rates spoil the party?

Richard Stavros, Executive Editor

You’ve heard the story. The local utility ought to be investing billions in new power plants, but the company CEO wants a guarantee from regulators for upfront costs and future operating expenses before laying down dollar one on the project. What to do? Utility CEOs attending the Edison Electric Institute’s 40th Financial Conference last month in Hollywood, Fla., were shuffling to the old rate base song-and-dance. But this time, they were working out a few new moves.

People

(December 2005) Mark Mulhern joins Progress Energy’s senior management committee and Bob Adrian is vice president of competitive commercial operations within the Ventures organization. The California Independent System Operator board of governors approved the appointment of Karen Edson to the position of vice president of external affairs. DTE Energy announced a series of organizational changes. The Southern California Edison board of directors elected John R. Fielder president.

What's Happening In the WECC?

High reserve margins and blackout risk are part of the extended forecast.

Richard Lauckhart

The Western Electricity Coordinating Council continues to experience a glut of generation and historically high levels of generating reserve margins. Despite these reserve margins, state and federal regulators are asserting that all is not well, and that rolling blackouts may return.

Letters to the Editor

Jay Morrison, Senior Regulatory Counsel, National Rural Electric Cooperative Association: I was disappointed to see that two different articles in the October 2005 issue erroneously stated that the Electricity Modernization Act requires net metering.

Bridging the Regulatory Divide

Regional committees may improve collaboration between federal and state regulators.

Sandra L. Hochstetter

Layered on top of ever-evolving industry restructuring and corresponding FERC rulemakings, we have the provisions of the Energy Policy Act of 2005. When viewed in totality, the new energy legislation provides the federal government with substantial new authority over generation and transmission that can, and might well be, used to alter the outcome of what a state would have decided under its previously exclusive jurisdictional domain. Whether we can avoid unhappy and rancorous confrontations with the use of joint boards, regional compacts, or regional state committees is yet to be seen, but it is my sincere hope that we can do so.

Interest Rates and Fiscal Armageddon

How to prepare for killer capital costs on future power-plant builds.

Richard Stavros

Mark Twain once wrote: “A banker is a fellow who lends you his umbrella when the sun is shining and wants it back when it starts to rain.” If utility finance executives aren’t careful, they might find themselves caught in the rain without an umbrella.

PJM's New Game

If transmission can substitute for gen-plant capacity, why not clear both products in the same auction?

Bruce W. Radford

PJM applied to FERC for authority to impose a new regime of requirements for reserves of electric generating capacity. This new construct, known as the reliability pricing model (RPM), would replace PJM’s current capacity market.

Battle Royal: Pulverized - Coal vs IGCC

The battle for the future of coal-fired power is heating up. Recent developments give IGCC a fighting chance.

Michael T. Burr

Does the future belong to pulverized coal or integrated gasification combined-cycle technologies? The answer will determine how the industry manages load growth and regulatory risks, while protecting shareholders and ratepayers.

The Capacity Market Enigma

Why haven’t reliability markets developed?

Jonathan A. Lesser, Ph.D. and Guillermo Israilevich, Ph.D.

Capacity and energy, although related, are not identical products. If we are to continue to rely on competitive market forces to provide new generation supplies, we need separate, long-term, installed capacity markets.

Regulated Utilities: Reinventing the Classic Business Strategy

Opportunities and limitations of five top strategies.

David Fornari and Branko Terzic

How can regulated utilities create value? Each of five key options present their own risks. Which way should management go?

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