When the phone rang it was Tom Mathews, director of mechanical and energy services at Hannaford Bros., the grocery chain that has become better known for shaving utility bills than trimming pork chops.
Mathews made news two years ago when Hannaford had threatened to install generating plants on site at some or all of its 140 or so retail stores, clustered in New England and the north and southeast states. Now he was calling to tell me about his new plan. He had secured a tentative agreement with EVANTAGE (a division of Virginia Power) to buy a complete package of bundled energy services.
"They'll pay our bills, monitor all our systems, identify capital projects and then carry out the projects--all for a guaranteed cost," says Mathews. "Think of it as rebundled service."
So Hannaford would quit the power business and go back to selling groceries.
"Actually," adds Mathews, "What we've found is that all of this is way too much for us. Even without electricity deregulation in place, we're already spending too much time on buying energy and looking at prices.
"At our stores in New Hampshire, we've been installing self-generation units in about a half-dozen stores, with about another half-dozen planned. {Hannaford wasn't selected for the state's pilot program in electric competition.] And we're involved in a case before the PUC to get a better backup rate from Public Service of New Hampshire. Wherever we had access to natural gas lines--about two-thirds of our installed electric load--we went to self-generation. Our plants are 650 kilowatts--from Waukesha, a big engine manufacturer in Wisconsin.
"Buying gas and transportation for our self-gen units is no simple matter. It requires a lot of expertise. And with electric deregulation we're going to get that in spades.
"We don't care to grow that part of our business."
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On April 28, the leasing agent for Chicago's 110-story Sears Tower joined with energy service marketer QST Energy Inc. to file a complaint with the Illinois Commerce Commission alleging that Commonwealth Edison had thwarted attempts by the agent and QST to install a $10-million, 13-megawatt, gas-fired cogeneration facility in the basement of the skyscraper. They allege that the cogen plant could supply both the building (heating, cooling, elevators, etc.) and its 100 or so tenants with electricity at a more economical price than would be available from Com Ed, the native utility. (QST claims the cogen plant would operate at 4 cents per kilowatt-hour.)
The complaint adds that Com Ed has refused to provide backup power for the cogen project (total building load is 26 MW, says Com Ed). Thus, the leasing agent and QST claim that Com Ed has violated state and federal laws that require utilities to encourage cogeneration. They also accuse Edison of reneging on a promise to the leasing agent to sell the "risers," the term for Com Ed's distribution lines that connect the tenants inside the building to the power grid. The risers are extensive enough to serve 6,000 homes, according to the utility.
"Edison has raised one spurious objection after another," says the complaint. It asks the Illinois commission to assess the costs that Com Ed would incur to allow the cogen plant to interconnect with all the utility's distribution facilities within the Sears Tower. The complaint then asks the Illinois regulators to compel access to the lines or direct Com Ed to sell the risers and other distribution assets to the Sears leasing agent at their fully depreciated cost.
(But as I read it, I found the 16-page complaint confused and misinformed. It cites a duty for utilities "to interconnect" with cogeneration facilities. Surely that rule concerns transmission line connections to allow generating resources to operate in parallel--not retail access to distribution lines. The complaint would interpret PURPA's purchase obligation as assuring QFs the right to sell power directly to the utility's retail customers. That's obviously wrong."
Nevertheless, QST is no neophyte. Self-styled as both a marketer and an energy services company, QST fancies itself a fierce competitor.
"We're broader than the average bear," says Christine Wood, QST's director of marketing and advertising. "We're not very utility-like. We create a customer-focused products."
Not very utility-like? In fact, QST is an affiliate of Central Illinois Light Co., the utility that introduced what is believed to be the nation's first pilot program for retail choice in electricity. On May 1, three days after QST filed its complaint, CILCO came out with a press release touting its average residential rate of 7.1 cents per kilowatt-hour as "60 percent less than Com Ed." In the same press release it notes that legislation was pending in Illinois to allow competition. It describes Com Ed and Illinois Power as opposing retail choice in electric power until the year 2005, and advised consumers to "contact their state representatives and tell them to support big price cuts next year and the opportunity to choose your electric supplier sooner rather than later."
Com Ed, for its part, calls the case a media stunt: "Nothing more than another step in the bargaining process," says William H. Downey, v.p. of commercial operations.
Com Ed spokesman Jeff Madsen points out that state and federal laws grant access to utility transmission lines for cogeneration facilities, but don't force utilities to open distribution lines to let cogenerators siphon off retail customers. He explains that Com Ed would willingly provide backup power to the Sears Tower to operate the building, but not for resale to tenants through Com Ed's own lines.
"We're not opposed to a cogen plant for the Sears tower facility (elevators, heating system, etc.). The problems is with serving the tenants. We're refusing to sell the distribution line or to give access to the line," says Madsen.
"CILCO would say we're being discriminatory because we've allowed access to our distribution lines in 45 other cases. But in each of those case, they were schools, hospitals, or small factories. The power supplied only the facility itself [that owned the on-site generation]. It didn't serve other individually metered Com Ed customers at the site."
What about the Sears tenants? Com Ed claims that Salomon Brothers and Merrill Lynch (two building tenants) gave the utility high marks for reliability. It quoted Salomon manager Henry A. Clark as skeptical of choosing an electric supplier just as state law-makers were debating a timetable for competition.
Com Ed's Jeff Madsen puts it this way: "They are circumventing the law by locking those tenants into fixed-rate contracts, before any reform law will take effect in Illinois. There is deregulation legislation underway in the state capitol right now. Everyone expects a bill to be passed by late May, with a phased transition to deregulation with open-access pilot programs beginning in 1988.
"The fact that the bill is pending right now raises a question about why CILCO would try to spend all this money at this exact time and lock in the tenants. They're simply replacing one monopoly with another."
Editor
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