News Digest
State PUCs
Single Party Billing. The New York PSC directed major gas and electric utilities in the state "to accommodate the wishes of retail access customers" by allowing for single-party billing either by competitive suppliers or the utilities, at the discretion of customers, effective no later than Oct. 2.
"A single bill is important to ensure the development of a robust competition in the utility industry," the PSC said.
Electric Restructuring. The New York PSC opened a case to consider the future of the competitive natural gas and electricity markets and the role of regulated utilities.
The PSC will study obstacles to rapid development of a retail market, especially for residential and small-use commercial customers, and whether utilities should sell products or services also available from private vendors. In addition, it will study funding of public benefit programs, such as for energy efficiency, research and development, and assistance to low-income customers.
The first progress report is due in mid-June from an administrative law judge.
Gas Restructuring. In late spring the Pennsylvania PUC finalized plans for retail choice in natural gas, which was set to begin in April.
- OK'd interim guidelines (patterned after electricity rules) on giving public notice of changes in operational status of gas suppliers.
- Set up a $1.2 million program for consumer education, funded by a competitively neutral and non-bypassable surcharge.
Gas Standby Rates. Affirming a prior ruling, the New York PSC rejected a call by the National Energy Marketers Association for a cut in rates (from $40.35 per dekatherm to $0.07 per dekatherm) charged by Consolidated Edison and Orange & Rockland to competitive gas suppliers for backup capacity service.
The PSC ruled that gas utilities could set the charge based on the difference between the value of capacity to make a bundled sale and the value of releasing pipeline capacity on a recallable basis.
Monopoly Abuse. The Michigan PSC dismissed a complaint by Total Petroleum Inc. that Consumers Energy unlawfully abused its monopoly position by refusing to provide electric service at rates and terms acceptable to Total, which reportedly was contemplating the formation of a municipal electric utility as an alternative.
The PSC concurred with an administrative law judge that Total was more responsible than Consumers for the breakdown of contract negotiations, citing the customer's refusal to yield on any of its demands for a short-term contract with a 60 percent rate discount, and the fact that Consumers made several concessions in the course of the negotiations.
Telephone Slamming. With the number of slamming complaints dropping from 510 in March 1999 to only 97 by December, the Michigan PSC canceled an initiative to develop a third-party administrator system to tighten the verification requirements for customer requests to change service providers.
Asset Securitizations. TXU, parent company of Texas Utilities Co., said it would appeal the Texas PUC's rejection of its proposal to securitize $1.65 billion in assets. Although a written order was not to be issued until April 14, the PUC had said earlier that it would allow securitization only for $357 million.
"It is truly disheartening that the commission failed to follow the [restructuring] law passed by the 76th legislature," said Tom Baker, president of TXU Electric distribution business unit.
Fuel Cost Adjustments. The Ohio PUC rejected an attempt by Toledo Edison Co. and Cleveland Electric Illuminating Co. to protect the current level of fuel clause adjustments (OK'd by the PUC in 1997) under a rate freeze ordered in the state's electric restructuring law, and thus avoid rate cuts in year 2000 for the electric fuel component (EFC) that the PUC OK'd back in 1997.
The PUC said the new law clearly delayed any repeal current EFC rules until the expected startup of retail choice, in year 2001.
EDI Standards. The New York PSC established the Internet as the preferred means of transacting electronic data interchange and called on utilities to file by the end of the year plans for standardized EDI for customer enrollment and billing functions.
The PSC also endorsed "ANSI X-12" as the standard for formatting electronic transactions, and reaffirmed that existing business practices may need to be modified to ensure an efficient electronic data interchange process. All market participants will be required to use EDI in the exchange of retail access data beginning in 2001.
Cost Adjustment Clauses. While authorizing Cheyenne Light, Fuel and Power Co. to boost electric rates by $2.1 million and gas rates by $1.2 million, the Wyoming PSC authorized the utility to implement a new "zero-based" energy cost adjustment mechanism, by which all wheeling and energy costs are removed from electric service base rates and recovered through the adjustment clause.
The PSC said that the new rate would provide more accurate price signals and fairer tracking of price components within utility rates.
Gas Industry Research. The New York PSC approved a petition by the New York Gas Group establishing a voluntary state funding mechanism for natural gas research and development programs, replacing the FERC surcharge on interstate pipelines for R&D at the Gas Research Institute.
Electric Restructuring. The Nevada PUC recently acted to adopt regulations in three areas in order to implement electric retail choice, but Nevada Power and Sierra Pacific companies since have gone to the courts attacking the Nevada law creating retail choice.
- Received comments on a proposal on how the PUC will select providers of last resort. Starting on July 1, 2001, the provider of last resort will be the electric distribution company affiliate, which will charge a rate not to exceed rates that were in effect on July 1, 1999.
- Took comments and held public hearings on a proposed rule for a universal tariff for meter services after determining that the rule would not impose a significant economic burden on small businesses.
Meanwhile, Nevada Power and Sierra Pacific on March 28 filed complaints in federal court to have the Nevada law that created the framework for a deregulated electric market in the state declared unconstitutional. The companies alleged the law will be detrimental to some customers while giving unfair advantages to others, based on regulatory decision implementing the law, and will be harmful to company shareholders.
Emergency Backup Service. In a case involving a 90-megawatt experimental retail access program, the Michigan PSC upheld a complaint by CMS Marketing, Services and Trading Co. that Detroit Edison was attempting to require third-party suppliers to sign a contract obligating them to pay an emergency energy service charge that had not been approved by any regulatory authority.
Vermont Energy Efficiency. Vermont on March 28 unveiled its "energy efficiency utility," which was created at the directive of the Vermont Board (See News Digest, December 1999, p. 17) to administer energy efficiency programs in the state.
The utility, the first of its kind in the nation, will be operated by Vermont Energy Investment Corp., a non-profit organization, and will replace most programs previously run by 22 electric utilities so as to provide uniformity in services offered around the state.
Texas Energy Efficiency. Rules adopted by the Texas PUC on March 1 the state's electric utilities to develop energy efficiency programs to offset 10 percent or more of a utility's annual growth in energy demand.
Utilities must develop standard-offer programs to install energy efficiency measures and services, and independent service providers will deliver the services to customers.
Utility Marketing Affiliates. The Wyoming PSC said it would not require structural separation of K N Energy's regulated and non-regulated activities, or require it to employ guidelines against cross subsidies developed in 1999 by the National Association of Regulatory Utility Commissioners. It explained that the gas utility's retail choice program was voluntary and limited in scope.
Power Plants
Grid Interconnection. The FERC ruled that when a power producer applies for authority to connect with the interstate electric transmission network without requesting transmission service at the same time, the interconnection service qualifies as an "element" of transmission service that is governed by the pro forma open-access transmission tariff mandated by FERC in Order 888.
Grid Interconnection. Entergy proposed and filed with the FERC a pro forma tariff governing rights, obligation, and procedures for the interconnection of generating plants with its transmission facilities.
It proposed a three-step process, including (1) a feasibility study that would take 45 business days, (2) a detailed interconnection study lasting eight to 10 weeks, and finally (3) a facility study lasting six to eight weeks.
In response, the Electric Power Supply Association on March 22 filed a protest against the Entergy tariff and proposed its own nine-point "Bill of Rights" for interconnections. EPSA said that power producers ought to be able to request interconnection without any transmission service (to suit tolling deals) but still preserve a right of first refusal that would guarantee them a reservation of transmission capacity in the future, should they seek to exercise that right.
SO2 Auctions. The Chicago Board of Trade's eighth annual acid rain allowance auction, conducted for the U.S. Environmental Protection Agency on March 27, sold 253,388 sulfur dioxide allowances, generating proceeds of over $25 million, to be returned to utilities in proportion to allowances withheld.
In the spot auction, American Electric Power purchased the most allowances, buying 60,000 (46.73 percent of total allowances) for $7.97 million, followed by Enron North America, which bought 19,850 (15.46 percent) for $2.55 million. AEP also led all other energy companies in the seven-year advance auction, buying up 109,776 allowances (87.82 percent) for $7.5 million. Each allowance authorizes a power plant to emit 1 ton of SO2 in a designated year or any year thereafter. For complete results, see www.epa.gov/acidrain/auctions/aucmain.html.
Auction Sale Proceeds. The New York PSC modified a proposal by Orange and Rockland Utilities for distributing the gain on the sale of its generation assets by requiring the company to set aside a portion of the gain for programs aimed at "competitive enhancement."
The PSC also allowed O&R to recover certain load pocket mitigation costs (call option payments) through its energy cost adjustment mechanism rather than through a deduction from the divestiture proceeds.
NOx Reductions. The Wisconsin PSC approved a plan by the state's electric utilities to spend approximately $950 million to reduce nitrogen oxide emissions from their generating plants in order to meet federal goals for emissions reduction mandated by the Clean Air Act and the Environmental Protection Agency.
The PSC will allow each investor-owned utility to propose a method for disclosing NOx compliance costs and recovering them in base rates, rather than through a surcharge.
It declined to allow depreciation of such costs, explaining that "the useful life of NOx controls remains uncertain." The PSC added that depreciation could cause the utilities to lose a significant amount of revenue if the controls become "prematurely obsolete."
Colstrip Sales Price. Expressing "serious concerns" about whether the $230.4 million sale price represented fair market value, the Oregon PUC denied Portland General Electric Co.'s application to sell its 20 percent interest in the Colstrip generating units 3 and 4 to PP&L Global.
The PUC noted that PUC staff analysis showed ratepayers would suffer a $71.3 million loss from Colstrip's sale over the remaining 26-year life of the plant.
Centralia Sales Proceeds. The Wyoming and Oregon commissions approved the sale by PacifiCorp of its 47.5 percent interest in the Centralia plant, and its 47.5 percent interest in the Centralia mine to TECWA Power and TECWA Fuel, respectively, both subsidiaries of TransAlta Energy Corp., but the two PUCs disagreed on a method to allocate the gain from the sale of the 1,340-MW coal-fired plant. Idaho differed as well in reviewing Avista Corp.'s sale of its 17.5 percent interest.
- . Found "no nexus between the proportion of the book value that has been depreciated and the proportion of the gain that should go to customers." Instead, the PUC said it preferred a method of assigning gain to the party that has born the risk and favored an allocation of a 95 percent share for ratepayers and 5 percent to shareholders in order to protect ratepayers from harm from the sale. But the PUC clarified that that allocation is for accounting purposes only, and that it will make a final decision in PacifiCorp's pending rate case docketed as UE 111.
- . Ordered Avista to return the $6.8 million Idaho share of its after-tax gain to Idaho ratepayers in the form of a 1.3 percent rate cut over the next eight years.
Exempt Wholesale Generators. A ruling issued by the Delaware PSC supports designation of generating facilities owned in part by Conectiv subsidiaries, Delmarva Power & Light Co. and Atlantic City Electric Co., as eligible facilities under federal law.
The companies sought the ruling to allow for the sale of their interest in the Peach Bottom, Salem, and Hope Creek Nuclear plants to PSEG Nuclear LLC, an exempt wholesale generator.
The PSC found that continued ownership of an interest in the plants was not necessary for reliability of electric service in Delaware and that during past periodic outages at the plants delmarva had been able to acquire substitute power to meet its load demands.
Gas Pipelines
Northern Border Project. Approving a "rolled-in" rate treatment for the $94.4 million project, the Federal Energy Regulatory Commission approved Northern Border Pipeline Co.'s Project 2000, a 34-mile pipeline going from Chicago to a delivery point near North Hayden, Ind., that will provide a direct link between Canadian natural gas supplies and the Northern Indiana markets.
The FERC rejected arguments that existing shippers will subsidize the project, but yielded somewhat by requiring Northern Border to file for new initial rates should cost overruns occur before the facilities go into service, thus the existing shippers an opportunity to object to the inclusion in their rates of cost overruns from Project 2000.
In affirming a need for the project, the FERC noted the 10-year contracts with five shippers: El Paso Energy Marketing Co., Bethlehem Steel Corp., Northern Indiana, Peoples Energy Services Corp., and Peoples Gas Light & Coke Co.
Studies and Reports
Uniform Business Practices. An interim report on an initiative to create uniform business practices in the deregulating electric industry, prepared for the Edison Electric Institute by Wayfinder Group, states that agreements have been reached among stakeholders in several areas, including customer information, switching, and billing.
The report states that customer switching generally should occur on the customer's meter read date, and that the Internet is widely accepted as the most efficient and forward-looking means for certified market stakeholders to obtain information authorized for release.
More workshops are scheduled for June, before the anticipated July release of the final report. See http://ubpnet.org/.
Market Power. A study from the Department of Energy concludes that the exercise of market power could significantly offset the projected benefits of competition in electricity generation markets.
It notes that in markets already restructured, such as in California and the United Kingdom, researchers have found that wholesale power prices have been as much as 75 percent above competitive levels at times.
"Because new plants must recover their capital costs as well as their operating costs to be attractive investments, there will be situations in which owners of existing plants who have market power can profitably raise prices above the competitive level without triggering entry," the report says. See www.doe.gov/HMP-0308.pdf.
Gas Storage Capacity. Regulatory changes coupled with steady growth in natural gas consumption are expected to trigger a 21 percent increase in gas storage capacity over the next 15 years, according to a new GRI study, "Natural Gas Storage Overview in a Changing Market Environment." The study estimates that storage capacity for working gas in the lower 48 states will grow from 3.8 trillion cubic feet in 1998 to 4.6 trillion cubic feet in 2015.
"These trends are already beginning to have a major impact on gas storage operations and will only be magnified in the future," said John Cochener, GRI project manager and principal analyst for resource evaluation.
"We are already seeing increases in the value of well-placed storage facilities, particularly those able to capitalize on regulatory changes that allow for greater operating flexibility."
Electric Customer Choice. The New York PSC announced on March 14 that an independent group, the Center for the Advancement of Energy Markets, places the Empire State behind only Pennsylvania in establishing customer choice in electricity.
In determining the rankings of the 50 states and the District of Columbia, the center examined 18 attributes, assigning numerical scores to each attribute to develop a composite score for each state.
Transmission & ISOs
ISO-Power Pool Combinations. On March 16 and March 22, respectively, the boards of directors of the Midwest Independent System Operator (MISO) and MAPPCOR (the corporate contractor for MAPP, the Mid-Continent Area Power Pool) OK'd four definitive agreements to combine the two organizations:
- Covers the period between execution of the definitive agreements and closing.
- Assures MAPP members who do not join MISO that transmission services will be provided for at least six years from MISO's operational date.
- Assures MAPP members that such services will be provided under the MAPP restated agreement for at least six years from MISO's operational date.
Closing of the deal will occur when two-thirds of MAPP load joins the Midwest ISO.
RTO Oversight. By April 5, the Virginia commission was to have received legal briefs addressing its role in governing the formation of state-mandated regional transmission entities for electric utilities.
Specifically, the commission had asked for a legal analysis of whether federal law preempts state laws or rules aimed at restructuring the electric transmission sector.
Canadian Transmission. The Alberta Energy and Utilities Board OK'd revenue requirements, rate design, and tariffs for ESBI Alberta Ltd, the Alberta electric industry's independent transmission administrator (ITA) that administers the province-wide grid.
It approved a standard offer process providing financial incentives for new generators to locate in parts of the province where transmission constraints need to be addressed.
Internet Commerce
Utility Industry Structure. Claiming regulated energy industries are "at risk of being largely bypassed by one of the most profound technological changes of the last thousand years," E-Comm.Com on March 28 filed a petition at the FERC for the FERC to open a rulemaking proceeding examining the impact of electronic commerce on those industries.
The petition backs E-Comm.Com's assertion that the energy industry is "at risk of losing control of [its] collective corporate destiny to businesses that have barely been created" by comparing the market capitalization of 15 e-commerce companies ($1.145 trillion) - none of which were even in existence as public companies when the FERC initiated its policy liberalizing energy markets in October 1985 - with that of some 27 large energy companies (only $193 billion). See www.energyecomm.com/,
Aggregator Licenses. Connecticut regulators granted electric aggregator licenses to two companies seeking authority to provide Internet-based power sales services to consumers:
- would receive compensation from licensed electric suppliers.
- . Run by CIBA, a for-profit subsidiary of Connecticut Business and Industry Association, and would offer electric aggregation services to association members, without taking title to electric supply. Also would be compensated by electric suppliers, with no surcharge to CIBA members.
Business Wire
Energycentric.Com has formed the first online business-to-business marketplace dedicated to the equipment and services side of the energy industry. Energycentric.Com will bring e-commerce to utilities and their suppliers without requiring significant investments in resources and technology by using the Internet as a marketplace. The website is designed for buying and selling products and services that go into the construction, maintenance, and operation of an energy delivery infrastructure for electricity and natural gas.
Xenos Group has announced the wireless capability of its flagship product, Documorph, which delivers information such as bills, statements, and notices to wireless devices, such as cell phones.
CMS Energy Corp., Marathon Ashland Petroleum LLC, and TEPPCO Partners L.P. have entered into an agreement to form a limited liability company that will own and operate an interstate refined petroleum products pipeline extending from the U.S. Gulf Coast to Illinois. Each of the companies will own a one-third interest in the LLC. The joint venture will build a 70-mile, 24-inch-diameter pipeline connecting TEPPCO's facility in Beaumont, Texas, with the start of an existing 720-mile, 26-inch-diameter pipeline extending from Longville, La., to Bourbon, Ill. The "Centennial Pipeline" will pass through portions of seven states.
Courts
Native Load Preference. The U.S. Supreme Court has let stand a 1999 ruling by a federal appeals court that the FERC could not require an electric utility to curtail electrical transmission to the company's wholesale customers on a comparable basis with its retail native load customers when experiencing power constraints.
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