Fortnightly Magazine - October 15 1995

Utility Finance After the TransitionJames T. Doudiet, John Higley, and Patricia Eckert

DOUDIET:Stranded investment has overshadowed other financial issues in the transition to a competitive electric utility industry. For example, what will post-transitional companies look like? Will they attract growth-oriented investors?

Utilities as monopolies enjoyed unparalleled access to the capital markets because price was based on cost. That structure assured the ability to raise funds under any and all circumstances, but it created an atypical industry.

Byline: 
James T. Doudiet, John Higley, and Patricia Eckert
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GRI: Low Energy Prices Are Coming

The Gas Research Institute (GRI) thinks total natural gas demand, driven by strong underlying economic activity, could grow to more than 29 quads by 2015, a 1.5-percent yearly increase from 1994's 21.4 quads (see, Baseline Projection of U.S. Energy Supply and Demand, GRI, 1996 ed.). This latest projection "describes an era of low energy prices, not just low oil prices," said Paul D. Holtberg, GRI executive economist, baseline analysis.

According to the report, gas demand for electric generation will account for half the growth.

Byline: 
Lori A. Burkhart
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Otter Tail Pursues WAPA

Otter Tail Power Co. (OTP) president John MacFarlane is pursuing the utility's plan to manage the assets of a portion of the Western Area Power Administration (WAPA) for a five-year period, to smooth the way toward privatization of the nation's power marketing agencies (PMAs).

MacFarlane has written for support to the senators who represent OTP's utility's three-state service area: Byron Dorgan (D-ND), Kent Conrad (D-ND), Tom Daschle (D-SD), Larry Pressler (R-SD), Rod Grams (R-MN), and Paul Wellstone (D-MN).

Byline: 
Lori A. Burkhart
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Electric Restructuring: NOt by FERC AloneVito Stagliano

The restructuring of electric utilities is fundamentally a matter of national policy (em not a regulatory issue. Regulators are ill-suited to make national policy because they are conditioned to act within the limits of authority specifically granted by legislation, rather than to seek a fresh statutory mandate in response to changed conditions. Policymakers must assess political, social, economic, technological, regional, and national factors to measure the need for reform.

Byline: 
Vito Stagliano
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Columbia Gas Seeks Market Rates

As part of a request to increase annual revenues by approximately $147 million, Columbia Gas Transmission has asked the Federal Energy

Regulatory Commission (FERC) to approve a set of market-based rates for short-term firm transportation, interruptible transportation, temporary capacity release, and storage services (Docket No. RP95-408).

Byline: 
Lori A. Burkhart
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Can the FERC Overcome Special Interest Politics?Jim Rossi

The competitive transformations of the natural gas and telecommunications industries are over a decade in the making. By contrast, competition in the electricity industry is still emerging. Special interests have defeated many proposed competitive reforms. For example, in 1988 the FERC failed in its attempt to adopt regulations to encourage competitive bidding and independent power producers (IPPs).1 Similarly, decades of forceful industry opposition delayed open access in bulk-power markets.

Byline: 
Jim Rossi
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Financial News

Does the size of a company affect the rate of return it should earn? If smaller companies should earn a higher return than larger firms, then small utilities, because of their size, should be allowed to adjust the rates they charge to customers.By far the most notable and well-documented apparent anomaly in the stock market is the effect of company size on equity returns. The first study focusing on the impact that company size exerts on security returns was performed by Rolf W.

Byline: 
Michael Annin
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Improving Competitive Position with Natural Gas Storage

On a cold day, natural gas from storage reservoirs may supply as much to markets as gas from producing wells. The ability to store gas underground not only ensures reliable delivery during periods of heavy demand, but also allows more level production and pipeline flows throughout the year. Thus, some believe that the cost of storage should be spread over all gas delivered during a year, not just gas delivered from storage sites to end-use customers during the winter.

Byline: 
John H. Herbert
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Electric Restructing and the California "MOU"Alex Henney

The California Memorandum of Understanding (MOU) is an agreement between Southern California Edison Co. (SCE), the California Manufacturers' Association, the California Large Energy Consumers' Association, and the Independent Energy Producers. It tackles three major issues:s recovery of stranded assets

s market power

s market structure.

If the MOU is eventually endorsed, it might be a landmark in electric restructuring \(em and not only in California.

Byline: 
Alex Henney
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