Calendar of Events

Jul 13, 2014 to Jul 16, 2014 | Dallas, TX
Aug 04, 2014 to Aug 15, 2014 | Michigan State University, East Lansing, MI
Aug 11, 2014 to Aug 12, 2014 | New York, NY

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Public Utilities Reports

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Frontlines & Op-Ed

An Open Checkbook

Why grid owners don't like FERC's new rules on gen interconnection.

 

 

A year ago, when a group of electric utilities in the Southwest signed off on deals to hook up new generators in Arizona with an innovative "common bus" treatment for two adjoining switchyards at the Palo Verde hub, the Federal Energy Regulatory Commission (FERC) was quick to heap on the praise. "Attaboy," said FERC's Pat Wood, at the commission's meeting of July 25, 2001. Nevertheless, over the past twelve months, FERC twice has proposed new rules to govern the way in which new power plants gain the right to interconnect with the interstate transmission grid. These new rules on gen interconnection form an essential part of the puzzle more aptly known as the standard market design (SMD).

Collateral Damage

Credit ratings agencies put the squeeze on merchant power.

Have they gone too far? Have ratings agencies become overzealous in their efforts to rein in energy merchants? Many in the industry are coming to that belief after Aquila, one of the industry's most respected companies and leaders, announced it would exit the merchant energy trading sector in late July. It said it could no longer meet the credit requirements imposed by ratings agencies to maintain that business.

Barbarians at the Gates

FERC... SEC... CFTC...Congress ... Ratings Agencies... Stockholders... Bondholders... Private Equity Investors?

No one has yet quantified or qualified the devastation to industry reputation, electric competition, or energy companies' future earnings power caused by the current round of energy trading scandals that is shaking the industry to its core.

Bursting The Bubble

Merchants' trading volumes and revenue are still too inflated.

Merchant energy trading and marketing certainly has represented a valuable earnings growth vehicle to many utilities. That much is certain. But in the post-Enron world, many continue to question the legitimacy of the practice of inflating revenues through the trading business to bolster the company's financial picture. At least that's the view of the Petroleum Finance Company (PFC), which recently conducted a study called "Distorting Reality? Inflated Sales of Energy Traders."

Biting Pat Wood's Hand

FERC finds the states have teeth, too.

FERC Chairman Pat Wood ought to be commended for trying to extend a hand of cooperation to state PUCs. But certainly he must by now understand that the nature of the state regulator, as the nature of the wolf, is unchangeable.

Indecent Disclosure?

Most pan FERC NOPR, but gas association eyes FERC role.

Docket No. RM02-3-000

Citing overlap with the Securities and Exchange Commission (SEC), the power industry has largely panned FERC's proposals to require greater disclosure on financial instruments and derivatives. Also criticized is FERC's move to force marketers to adopt reporting standards similar to the Uniform Systems of Accounts (USOA) used by utilities, as announced in the commission's Notice of Proposed Rulemaking (NOPR) issued Jan. 16.

Three-Legged Stool

The smart money now treats transmission as a player. Just like generation. Just like load.

Over at the Federal Energy Regulatory Commission, new chairman Pat Wood has let it be known he might have done it the other way. If he had been in charge, say the press reports, he would have postponed Order 2000. He would not have asked electric utilities for any commitment to join a regional transmission organization (RTO) until after the FERC had first devised a comprehensive set of rules-a standard market design (SMD)-for RTOs and stand-alone independent transmission companies (transco's, or ITCs).

The Doomsday Scenario

Debt + secret triggers = another Enron.

Much the same way that bankers used to worry about a "run on the bank," where there is an overwhelming demand for liquidity that causes a solvent bank to fail, so should energy companies be worried that their use of material adverse change (MAC) clauses might trigger an overwhelming demand for liquidity that causes a once solvent energy company to fail. Of course, the banks now have the Fed to protect the financial system from a liquidity crisis. No such luck for the energy industry.

Politically Inelastic?

Electric pricing issues are hard to overcome.

Do politicians really mean what they say when they call for competitive markets in electricity at the wholesale and retail levels? Rivals of California Gov. Gray Davis champion competitive electric markets. But what if, after elections, California markets are then fixed (with unanimous consent), and prices continue to be high? Will that politician still stand behind competitive markets?

California: Beginning Anew

The 2002 rhetoric sounds like pro-electric competition, but is it too little, too late?

It's no secret that Californians like happy endings. Just look at most Hollywood movies, which like to tie up the story's loose ends in less than two hours (usually). But in its recent efforts to tie up the loose ends left from the California Crisis, is the state setting itself up for a sequel, California Crisis II: A Not So Beautiful Market.

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