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Fortnightly Magazine - July 2011

Pricing the Public Good

Weighing green energy’s costs and benefits.

Michael T. Burr, Editor-in-Chief

Policies aimed at promoting one good thing can diminish a better thing, for a net loss to the overall public welfare. Raising prices to promote renewables, for example, makes electricity less affordable and hurts the economy. But artificially low prices can themselves create social ills — by preserving an unsustainable status quo.

Cali Gets it Right

Not your father’s feed-in tariff.

Mike Hall

The industry has struggled to craft a feed-in-tariff (FiT) structure that works for solar generators and utility customers, with mixed success. But now, the California Public Utility Commission might have found an approach that other states can replicate. CPUC’s FiT mechanism recognizes the value proposition of solar energy, and uses market forces to drive economic improvements, especially for distributed solar projects.

People

(July 2011) Xcel Energy names new president and COO; Pacific Gas and Electric adds new senior v.p. and chief information officer; NorthWestern Energy appoints new members to executive management team; plus senior staff changes at Constellation Energy, Alliant Energy, GDF SUEZ, and others.

Reconsidering Synergies

Cap-ex plans raise the stakes for utility mergers.

Kevin C. Fitzgerald and Christopher R. Jones

Investors historically have been skeptical about merger synergies in utility mergers, assuming that regulators will insist that most or all economic benefits flow to customers. However, recent transactions suggest utilities are taking a different approach to valuing synergies that might strengthen the case for mergers — not just for the merging parties, but also for investors and regulators.

Zone of Reasonableness

Coping with rising profitability, a decade after restructuring.

Jeff D. Makholm and Kurt G. Strunk

With a recent flurry of gas pipeline rate investigations at the Federal Energy Regulatory Commission (FERC), many pipeline owners face the prospect of having their profits scrutinized to ensure their rates are just and reasonable. Understanding FERC’s approach will help companies ensure they’re not falling outside the zone of reasonableness.

Transactions

(July 2011) Central Vermont Public Service to acquire Fortis, Constellation Energy agrees to buy StarTex Power, Exelon enters purchase agreement for Wolf Hollow project, and others.

Capacity Roulette

Out of market means out of luck—even for self-supply.

Bruce W. Radford

When the U.S. Federal Energy Regulatory Commission issued its so-called ”MOPR“ decision in April 2011, approving a minimum offer price rule (or bid floor) for PJM RPM capacity market — and then on the very next day did much the same for New England’s FCM capacity market — FERC did more than just prop up prices. Instead, it created a nightmare scenario for utilities that still own their own generation. These utilities, who choose to “self-supply” with their own plants, rather than buy capacity from either the RPM or FCM, adequacy rules, could now be forced to pay twice for capacity — if their own plants are deemed inefficient or uneconomic.

Securing Tomorrow's Grid (Part I)

Protecting smart systems against cyber threats.

Hank Kenchington, et al.

Smart grid technologies bring a host of cyber security considerations that need to be addressed throughout the T&D domain—and even into the customer’s home. In this exclusive report, Department of Energy authors team up with industry experts to examine how to deal with the changes and challenges of securing the smart grid.

Cyber Attack!

Protecting critical assets in a hazardous world.

Torsten George

In the wake of recent global-scale cyber intrusions, security concerns have expanded from being compliance and operational issues to fundamental risk management considerations. An integrated, enterprise-wide approach holds the greatest promise for securing critical utility infrastructure against increasing dangers in cyberspace.

Restructuring Realities

Can higher electricity prices be more affordable?

J.P. Pfeifenberger and A.C. Schumacher

Over the past four years, power prices increased significantly in both restructured and non-restructured states—but then the recession and falling gas prices changed the picture for retail electricity rates. Comparing various states shows a surprising result: In restructured states, electricity bills are more affordable—even though rates are higher.

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