I don't know about you, but the Internet is driving me carzy. Every week I discover a half-dozen new home pages to add to my reading list. Some may view NetscapeÔ as an investment play. I see it as drama.

As a magazine editor (em someone who gets paid to follow the news (em I feel guilty if I don't click on every link and download every file. I call it the "obligation to surf." And the problem grows worse as more government agencies post their decisions online. My vote for worst offender goes to the California Public Utilities Commission (CPUC). At the same time, however, the CPUC attracts a lot of attention with its online electric restructuring forum (http://www.cpuc.ca.gov). By providing "virtual direct access" to policymaking, it turns regulation into vaudeville.

Take my bookmarks, please.

Off the Roadmap

As the battle heats up over the fate of stranded costs, you can watch it play out, right on your computer screen. But first, take a moment to download a few documents from the CPUC's Internet home page:

s The CPUC's March 13 "Roadmap" order (Decision 96-03-02), which plots the timeline for electric restructuring

s PG&E's emergency motion for relief on stranded costs, accusing the competition of "sham" attempts to "launder" power and thus "bleed" investor-owned utilities (IOUs)

s The CPUC's surprising April 10 order (Decision 96-04-054) to convene a three-day collaboration to define a "competitive" transition charge" (CTC) and head off trouble

s Commissioner Jesse J. Knight, Jr.'s dissenting opinion, chiding the CPUC for abandoning its principles.

It seems that, in California, electric customers may not be content to sit quietly and wait for their first CTC invoice for stranded costs. According to PG&E, Destec Power Services, Inc. was attempting in January to help some PG&E retail customers bypass the supposedly nonbypassable CTC by teaming up with the Modesto and Turlock Irrigation Districts and other public power entities.

As alleged, Destec would supply generation to former PG&E customers through duplicate transmission lines (owned or built by Modesto or Turlock) connected to private, customer-owned substations. In that way, certain PG&E customers could obtain "sham" wholesale service from Destec, "laundered" through Modesto and Turlock, thus bypassing any investor-owned transmission or distribution plant subject to CPUC jurisdiction.

The CPUC denied PG&E's plea for a lump-sum advance payment of the CTC, but saw enough of a problem to ask the IOUs to collaborate on an interim solution. But Commissioner Knight warned of attempts to "goldplate" stranded costs, and accused the CPUC of "abandoning our roadmap decision in the first month of its engagement."

Said Knight: "I am concerned that removal of these competitive options will remove the competitive pressure to mitigate and minimize stranded costs as we move forward."

The $1.25-Billion Download

The Ohio Public Utilities Commission was not so forbearing, however, in its April 11 rate case order for Toledo Edison Co. and the Cleveland Electric Illuminating Co., posted the same day in full text on the Ohio PUC home page (http://mabel.puc.ohio.gov).

On one hand, the PUC granted a combined $119-million increase in annual rates for the two Centerior subsidiaries. On the other hand (em accepting consulting firm Hagler Bailly's opinion that Centerior's contingency plans were "dangerously inadequate" (em the PUC recommended that the companies write off $1.25 billion in assets. Clearly, the PUC feels that today's competitive environment makes it highly unlikely that Centerior will ever recover those assets (em even without retail wheeling:

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"Our findings are based on the competitive situation today. .. . We are not even considering the advent of retail wheeling, which will put additional competitive pressure on the companies."

Legal scholars take note: The PUC denied arguments that a writedown would confiscate Centerior's property, or that such action would ignore "possible future legislation" that might permit recovery of all or part of the company's stranded investment.

Awaiting the Finale

At press time, the Federal Energy Regulatory Commission (FERC) had not yet released its final rule in the electric "Mega-NOPR" docket on electric transmission and stranded investment (em nor had it offered any clues on the Internet.

By contrast, various cyberspace drafts circulated in early April previewed documents to be filed April 29 by the three major IOUs in California. All request authority from the FERC to sell bulk power at market-based rates through the Western Power Exchange (WPEX), and to convey operational dispatch control of certain designated facilities to an independent system operator (ISO).

As late as April 17, however, National Independent Energy Producers (NIEP) was filing comments urging the FERC to define and mandate ISOs as part of the Mega-NOPR or some subsequent FERC action. NIEP chair Ellen Roy, vice president of Intercontinental Energy, clarified the organization's concern:

"We work with the power pools every day, and the transmission owners are in control. Frankly, we don't think anyone can fine-tune these existing organizations into a true ISO. ... [I]t has to be built from the ground up."

Earlier, I had talked with Les Stark, manager of federal regulatory affairs at Southern California Edison Co., who assured me that the WEPEX model will not conflict with the Federal Power Act or the FERC's vision of a competitive electric industry.

"When you have an ISO," said Stark, "Anyone has the right to inject power into the system. But the notion that you can purchase specific rights on the transmission system is a fiction. Instead, you have a right of access into and out of the system."

To a certain extent, Stark suggested, the pool approach duplicates rights inherent in the FERC's pro forma tariffs: "The FERC required a long-term, firm point-to-point transmission contract. The pool provides the equivalent right in two steps: First, IPPs have right to interconnect; Second, IPPs can hedge the variable transmission cost through a transmission congestion contract."

And Stark fully believes the WEPEX ISO will remain independent: "The ISO will run the system, but Edison will maintain it. The ISO will not have a financial interest in the transmission system (em like an air-traffic controller."

As for timing, Stark considers the FERC's final rule completely separate from the WEPEX filing on April 29: "I'd be happy to see the final Mega-NOPR rule come out before we file."

Editor

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