Electric Standard Offers. Connecticut OK'd a regulated standard offer distribution rate of 10.84 cents per kilowatt-hour for United Illuminating Co. The rate included subcomponent rates:
Gen. Shopping Credit 4.52 cents
T&D Regulated Service 3.89 cents
Systems Benefit Charge 0.17 cents
Compet. Transition Charge 1.91 cents
Conservation Funding 0.3 cents
Renewable Energy Funding 0.05 cents
The T&D charge was calculated without backing out unbundled retail transmission subject to FERC jurisdiction. Docket No. 99-03-35, Oct. 1, 1999 (Conn.D.P.U.C.).
Retail Electric Restructuring. The Ohio PUC staff proposed rules to govern electric utility transition plans to be filed early next year under the state's restructuring legislation signed July 6. Among other ideas, the staff proposed a punitive royalty, payable to a special education fund, if a utility marketing affiliate wins too high a market share in the service territory of its parent utility.
The staff proposal also would call on utilities to provide suggestions on how to modify the structure of the Midwest ISO and the proposed Alliance transco, to meet requirements of the new Ohio law, and how their plans to participate in an RTE (regional transmission entity) would help save Ohio consumers from having to pay multiple access charges for transmission.
The staff proposal would design shopping credits to assure that at least 20 percent of customers in each class - residential, industrial, commercial - will switch to a competitive supplier. Case No. 99-1141-EL-ORD, Sept. 30, 1999 (Ohio P.U.C.).
Electric Standard Offers. Citing problems with shopping credits and the retail standard offer for default electric service, the Massachusetts commission rejected a schedule of standard offer prices for the period 1999-2005, submitted by Western Massachusetts Electric Co. Instead, where WMECO's retail price had fallen below its actual wholesale cost of power, the commission told the utility to boost its standard offer price to reflect the higher wholesale power cost.
It also rejected proposals by its staff to ban utility affiliates from bidding in the competitive solicitation to procure capacity for standard offer service or to open up the main bidding tranche for base load to increments as low as 1 MW.
Regulators acknowledged that bidders would require access to relatively large amounts of generation in order to bid under the main tranche, but suggested that small bidders could participate in other rounds reserved for partial load or miscellaneous services. D.T.E. 97-120, Sept. 17, 1999 (Mass.D.T.E.).
Power Quality. Comments were due Oct. 13 in a new rulemaking docket opened by Washington state regulators to examine electric system reliability, including service interruptions and power quality. Docket No. UE-991168, Sept. 24, 1999 (Wash.U.T.C.).
Billing Disputes. The Maine PUC opened a rulemaking docket on rules governing interactions between competitive energy suppliers and transmission and distribution utilities. Among other things, it proposed that partial payments under a single-billing format should be applied first to satisfy obligations owed to the T&D utility. Docket No. 99-659, Sept. 28, 1999 (Maine P.U.C.).
Restructuring Settlements. On Sept. 23, Arizona regulators OK'd a settlement involving Arizona Public Service and a broad-based coalition of customers and industry associations that continues a trend of annual price reductions for customers, resolution of deregulation issues and allows stranded cost recovery.
The agreement calls for a new 7.5 percent cut in residential and business rates between 1999 and 2003 (1.5 percent per year), vs. a 5 percent cut for larger customers (3 MW or more) between 1999 and 2002.
Local Distribution Funding. Wisconsin Electric has petitioned the Wisconsin PSC for an $80 million revenue hike (a 3.1 percent electric rate increase and a 2.3 percent natural gas rate increase), effective in 2000, followed by an additional 2 percent electric rate hike in 2001, so that it can accelerate distribution system improvements in an effort to improve reliability.
Rate Case Procedure. Dec. 21 is the deadline for interested parties to file comments on the Virginia commission staff's report on amending rules governing the filing of utility rate increase applications, in light of the state's recently passed Electric Utility Restructuring Act. The staff report was to be submitted by Nov. 9. Case No. PUA990054, Sept. 14, 1999 (Va.C.C.).
Net Metering. The New Mexico commission approved net metering regulations to govern connection to the regulated utility grid for customer-owned renewable energy and fuel cell electric generation sources, but limited eligibility only to customers with qualifying cogeneration facilities of 10 kilowatts or less.
It asked the staff to initiate a rulemaking to determine whether to extend net metering rights to customers with non-QF facilities, such as small gas turbines and other alternative technology generators. Case No. 2847, Sept.7, 1999 (N.M.P.R.C.).
Rate Freezes. New Mexico regulators OK'd a settlement for Public Service Co. of New Mexico to reduce rates by $34 million (a 6.73 percent across-the-board cut for all classes) and then freeze rates until implementation of open access or Jan. 1, 2003, whichever comes first. The rate reductions anticipate open access market reforms scheduled to begin Jan. 1, 2001. Case No. 2761, Aug. 25, 1999 (N.M.P.R.C.).
Default Service. The Montana PSC proposed rules to create a competitive bidding process to solicit generation resources for standard offer electric utility service offered to customers who do not choose a competitive supplier. It said its proposal was fashioned after rules already developed in Maine. Docket No. L-99.7.9-RUL, Sept. 9, 1999 (Mont.P.S.C.).
Gas Utility Diversification. Missouri regulators declined to award blanket authority to local gas utility Southern Union Co. for authority to invest in gas and electric utility properties - including "non-control" interests of less than 10 percent in utilities the PSC doesn't regulate - saying it had no leeway to avoid a case-by-case review. Case No. GF-98-425, Aug. 27, 1999 (Mo.P.S.C.).
Return on Equity. On remand from the state Supreme Court, the North Carolina commission reaffirmed the same 11.4 percent return on equity for Pennsylvania & Southern Gas Co. that it had set earlier. The court had complained that in the first order the regulators failed to "adduce" an independent conclusion by simply ratifying a stipulation. Docket No. G-3, SUB 186, Aug. 18, 1999 (N.C.U.C.).
Internet Broadcasting. In an effort to achieve "the widest possible dissemination," the Texas PUC issued a request for proposals to provide live Internet broadcasts of its open meetings next year. RFP No. 0-473-002, Oct. 15, 1999 (Tex.P.U.C.).
Landowner Outreach. Seeking to ensure that landowners have ample opportunity to participate in its pipeline certificate process, the FERC approved a final rule requiring pipeline companies to notify affected landowners within three business days of filing a FERC application, in addition to placing notices in local newspapers.
The final rule is part of the FERC's review of its regulations to explore ways to make its certificate process more efficient and effective. Docket No. RM98-17-000, 89 FERC ¶61,028, Oct. 13, 1999.
Y2K Precautions. To guard against a loss of data at the start of calendar year 2000, Transcontinental Gas Pipeline Corp. won authority to require third parties to submit gas nominations and capacity release offers for the first week of the new year by Dec. 28 and 27, respectively, to allow the pipeline to store the information on its computer in advance.
Philadelphia Gas Works intervened to ask for more detail on what Transco thought might go wrong. Dynegy Marketing and Trade wanted to know how Transco would reallocate capacity after resolving any actual Y2K problems. Florida Gas Transmission intervened to say it "could hand deliver nominations to Transco, if necessary."
FERC Chairman James Hoecker called the move an "early version" of when "the short-term gas market meets the millennium." Docket No. RP99-501-000, Sept. 30, 1999 (F.E.R.C.).
Calvert Cliffs Relicensing. Marking an early victory for Baltimore Gas & Electric, the staff of the Nuclear Regulatory Commission issued findings that suggest few environmental problems associated with renewing the license for the Calvert Cliffs nuclear plant units 1 and 2.
The staff recommends that the NRC determine that "the adverse environmental impacts ¼ are not so great that preserving the option of license renewal for energy planning decision-makers would be unreasonable." NRC Docket Nos. 50-317, 50-318, Oct. 5, 1999, 64 Fed.Reg. 55786, published Oct. 14, 1999.
Foreign Ownership. The Nuclear Regulatory Commission released its new standard review plan for evaluating applications for nuclear licenses that involve foreign interests.
Where the applicant is wholly owned by a foreign parent but seeks to acquire less than a 100 percent interest in a reactor, the NRC will consider the extent of the proposed ownership, whether the applicant seeks authority to operate the plant, whether the applicant has interlocking directors or officers, whether the applicant could have access to restricted data and details concerning ownership of the foreign parent company.
In comments filed earlier, the Nuclear Energy Institute had suggested that foreign interests should be allowed to own "a significant share" of a nuclear plant, and said the NRC's plan provided an "appropriate degree of regulatory flexibility."
AmerGen (a company with foreign interests that has been shopping for nuclear plants in the United States) had asked the NRC to set up "safe harbors" for certain ownership and operating arrangements, plus a stock threshold creating a presumption of no foreign control absent foreign involvement in management or operation, but the NRC had declined. It noted the difficulty of accounting "for every potential fact or circumstance that could be present in any given situation."
PECO Energy had asked the NRC to show "some degree of deference" based on whether the applicant comes from a country with "close ties" to the United States, but the NRC again declined. 64 Fed.Reg. 52355, published Sept. 28, 1999.
California PUC Selection. California Gov. Gray Davis on Sept. 27 signed into law a bill that takes away the state PUC's authority to designate its own president and gives that authority to the governor. The measure (Senate Bill 33) also transfers from the PUC to the president authority to supervise the PUC attorney and executive director.
Mergers & Acquisitions
Western + KCP&L. On Sept. 28 Kansas regulators issued their long-awaited order approving the merger of Western Resources and Kansas City Power & Light to form Westar Energy, imposing a four-year rate freeze that won't fix a hotly contested retail rate disparity between the cities of Topeka and Wichita. The disparity in rates stems from uneven allocations to ratepayers of the different types of pre-1991 plant investments made by Kansas Power & Light (KPL) and Kansas Gas & Electric (KGE), the two companies that combined nearly a decade ago to form Western Resources. Docket No. 97-WSRE-676-MER, Sept. 28, 1999 (K.C.C.).
The city of Wichita had moved three weeks earlier to file a complaint with the Federal Energy Regulatory Commission to challenge the rate disparity indirectly by attacking the wholesale allocations of power capacity between KPL and KGE. It alleged that KGE failed to abide by a joint operating agreement with Western Resources utility KPL by selling capacity to KPL at below embedded cost. FERC Docket No. EL99-90, filed Sept. 7, 1999.
El Paso + Sonat. The FERC approved the gas pipeline merger between El Paso Energy Corp. and Sonat Inc., but Commissioner Curt Hébert (also voting for the merger) disassociated himself from the order's guidance on how to analyze merger effects on competition in downstream and upstream gas markets, saying it could bind the FERC too restrictively in future cases. Docket No. EC99-73-000, 88 FERC ¶61,302, Sept. 29, 1999.
Meanwhile, El Paso Energy entered into an agreement with the Federal Trade Commission whereby it would divest its 100 percent ownership of East Tennessee Natural Gas Co., Sonat's Sea Robin Pipeline Co., and Sonat's one-third interest in Destin Pipeline Co. LLC.
El Paso + Bonneville Pacific. El Paso Energy Corp. on Sept. 20 agreed to purchase Salt Lake City-based Bonneville Pacific Corp. for $63 million. Bonneville Pacific had filed for Chapter 11 bankruptcy in 1991 when investigators found the company's initial public stock offering was based on exaggerated value.
El Paso's acquisition includes a 50 percent interest in Nevada Cogeneration Associates No. 1, an 85-megawatt power plant that sells to Nevada Power Co. Also acquired is Bonneville Pacific Services, which provides O&M services to cogeneration facilities near Las Vegas.
"The acquisition represents our first entry into the Nevada power market, one of the fastest growing regions in the country," said Greg Jenkins, president of El Paso Merchant Energy. El Paso Energy owns the nation's only coast-to-coast natural gas pipeline system.
SBC + Ameritech. By a 3-2 vote, Illinois regulators approved the merger between baby bells SBC Communications Inc. and Ameritech (parent company of local carrier Illinois Bell Telephone Co.). Dissenting commissioner Ruth Kretschmer severely criticized the commission for effectively eliminating SBC as a future competitor in Illinois.
"We do not have a smoking gun showing SBC's plans to enter Illinois," said Kretschmer. "[But] I believe ¼ that SBC would have been forced to enter Illinois in the near future." Docket 98-0555, Sept. 23, 1999 (Ill.C.C.).
Transmission & ISOs
ISO Market Design. By a 3-2 vote, the FERC approved two orders allowing market rule revisions for the New England Independent System Operator as a temporary fix for market design flaws that create electric capacity shortages several times a year. Commissioners Vicky Bailey and Curt Hébert dissented.
The flaws will be corrected in a comprehensive market redesign to be made by Dec. 31, 1999, but in the interim, the ISO asked to implement a temporary price cap and reduce capacity obligations for participants to minimum levels.
Hébert said he saw no design flaws and found the price cap remedy "destructive." Commissioner Bailey said she had accepted price caps before in limited circumstances, but only to fix a technological glitch.
"This process can be messy," said Bailey. "Prices, depending on market circumstances, may temporarily spike upward. Nevertheless, I believe it is better to allow for such short-term gyrations to assure [that] price signals dictate efficient longer-term solutions." Docket Nos. ER99-4002-000 et al., 88 FERC ¶61,916, Sept. 30, 1999.
Coal Plant Emissions. New York state is pursuing a controversial new line of attack against pollution by using the resources of the state Office of Attorney General to file private citizen lawsuits against the owners of 17 coal-burning power plants located in so-called "upwind" states. If filed, it is believed the lawsuits would mark the first attempt by a state government against individual companies whose plants send pollution across state lines.
New York Attorney General Eliot L. Spitzer sent letters to the companies giving notice of intent by his office to sue, using the procedure intended for private citizens' complaints. The suit would allege failure to upgrade smokestack emission scrubbers as required under the federal Clean Air Act, arguing that some older plants in the Midwest should not be grandfathered under the Clean Air Act because of life-extension projects and other significant plant modifications.
Gen Market Studies. Ohio regulators retained Resource Data International to perform a study evaluating the market value of electric generating assets in Ohio, as a starting point for setting recovery of transition costs in the electric restructuring process. Case No. 99-863-EL-UNC, Sept. 23, 1999 (Ohio P.U.C.).
New Construction. Ohio also found enough need for new electric capacity in the ECAR region (East Central Area Reliability Coordination Agreement) to justify a certificate for a new 390-MW gas-fired power plant (three 130-MW simple-cycle turbines) planned by MidAtlantic Energy Development Co. at Toledo Edison's Richland substation in Defiance County. Case No. 99-586-EL-BGN, Sept. 13, 1999 (Ohio P.U.C.).
California Hydro Divestiture. Pacific Gas & Electric Co. has filed a notice of intent at the U.S. Securities and Exchange Commission, saying it plans to auction off its $3.3 billion system of hydroelectric generating resources, having failed to gain enough support in the California legislature prior to a Sept. 10 adjournment for approval of a fast-track transfer of the hydro plants to an unregulated affiliate.
Midwest Reshuffling. Orion Power Holdings on Sept. 27 entered an agreement to purchase Duquesne Light Co.'s competitive integrated energy business for $1.7 billion, including seven power generating plants totaling 2,614 MW of capacity (Duquesne had acquired three of those plants recently in a swap with FirstEnergy).
"Acquiring this portfolio has enabled us to double the size of our business," said Jack Fusco, Orion's COO. Orion must sell capacity back to Duquesne as needed to allow the utility to serve its standard-offer default customers.
Texas Plant Selloff. TXU Electric says it is selling six gas-fired electric generating plants, totaling 3,116 MW in generating capacity (Mountain Creek, Parkdale, North Main, Lake Creek, Tradinghouse and Rivercrest). Purchasers may bid on an individual plant, or any combination of plants. TXU will replace the plants' energy, when needed, with power purchases on the wholesale market.
Texas electric restructuring legislation requires that any plants sold be operated and maintained by the same operating personnel for at least two years if the sale is concluded before Jan. 1, 2002. TXU expects to complete the sale by the end of 2000.
Nuclear Sales. Conectiv on Sept. 30 agreed to sell its ownership interests in three nuclear power plants to PSEG Power LLC and PECO Energy Co. for $20 million plus reimbursement of actual fuel inventory at closing, ridding the company of all nuclear ownership.
The company is selling a 15 percent interest (328 MW) in Peach Bottom Units 2 and 3 in equal shares to the PSEG and PECO co-owners, a 14.8 percent interest (328 MW) in the Salem plant to PSEG (which already owns a 43 percent interest), and a 5 percent interest (52 MW) in the Hope Creek plant to PSEG, giving that company full ownership in the plant.
Hydropower Allocations. A federal appeals court ruled that the FERC could direct the operator of the federally licensed Priest Rapids hydropower project to use a market-based method to allocate a slice (30 percent) of project output among state-affiliated power marketing agencies, rejecting claims that the relevant federal statute required the licensee to offer a portion of power to government-run power marketing agencies at cost-based rates. Kootenai Elec. Co-op. v. FERC, Nos. 98-1275, 98-1367, 1999 WL 798064, Oct. 8, 1999 (D.C.Cir.).
EMF Claims. A state court denied arguments by Indiana Michigan Power Co. that a complaint seeking damages for nuisance, trespass and negligence (mental distress, pain and suffering, medical expenses) arising from electromagnetic fields associated with electric transmission lines must be filed first with the state utility commission because it involves the safety of public utility facilities. Ind. Mich. Power Co. v. Runge, No. 50A05-9811-CV-529, 1999 WL 793711, Oct. 6, 1999 (Ind.App.).
Age Discrimination. A federal appeals court affirmed a trial court order that dismissed an age discrimination suit filed against Entergy Corp. filed by employees who had complained of low rankings under a newly installed employee evaluation system.
The plaintiffs had argued that the law required Entergy to prove a business necessity for the new system - not just a business justification - but the court said the plaintiffs had failed to object to the jury instruction and so lost their appellate rights on the point. Allen et al v. Entergy Corp., No. 98-1715, 1999 WL 800162, Oct. 8, 1999 (8th Cir.).
Bellcore Sales Revenues. A New York appeals court overturned a state PSC ruling that would have forced New York Telephone Co. to pay customers some $19 million in revenues it received when NYNEX Corp. sold its interest in Bell Communications Research Inc. (also known as Bellcore).
The court found no proof that ratepayers had funded Bellcore ownership beyond the nominal cost of Bellcore services already reflected in rates. New York Tel. Co. v. N.Y. PSC, Slip Opin. 07307, 1999 WL 682035, Sept. 2, 1999 (N.Y.App.Div.).
Boundary Disputes. An Indiana court ruled that state regulators could settle a service territory dispute between an electric utility and a rural co-op concerning an industrial park developed by a municipal airport authority, because the parcel was a "single tract" under state law, though it contained subdivided parcels for lease to industrial tenants. United Rural Elec. Memb. Corp. v. Ind. Mich. Power Co., No. 93A02-9809-EX-747, 1999 WL 778390, Sept. 29, 1999 (Ind.App.).
Derivatives Trading. The world's first exchange-traded, temperature-related weather derivatives began trading Sept. 22 on the Chicago Mercantile Exchange (CME). The CME initially is listing Heating Degree Day (HDD) futures for four U.S. cities - Atlanta, Chicago, Cincinnati and New York. Weather affects an estimated 20 percent of the $9 trillion U.S. economy.
Energy firms that will make markets in the new contracts include Aquila Energy, Castlebridge Weather Markets, Enron Corp., Koch Energy Trading and Southern Energy. "Now businesses have a new tool for protecting their revenues when weather depresses demand or results in increased costs," said CME chairman Scott Gordon.
Consumer Marketing Practices. The Pennsylvania Bureau of Consumer Protection has reached an agreement with GreenMountain.com to resolve claims that Green Mountain Energy Resources, which has since merged with the company, had misled Pennsylvania consumers in a fall 1998 mailing about savings they would receive.
Under the terms of the agreement, GreenMountain.com denies any wrongdoing but must send letters to consumers who received the direct mailings, and must pay $100,000 toward the cost of the investigation.
According to investigators, the mailed advertisements, sent to 3.5 million consumers in Pennsylvania, contained price comparisons among suppliers that had the gross receipts tax subtracted from GreenMountain prices.
Studies & Reports
Natural Gas Choice. More than a quarter of a million Michigan natural gas customers have selected an alternate natural gas supplier under the state's customer choice pilot programs, according to PSC Chairman John Strand.
Under three-year pilot programs for customer choice in gas, the greatest participation was reported for Consumers Energy, totaling 159,000 participating residential customers, and 15,900 in the commercial class.
"Since December 1998, the number of Michigan customers exercising their right to choose their natural gas suppliers has more than doubled," Strand said. "Michigan's natural gas customer choice programs are some of the most successful programs in the nation."
Electric Choice. Dispelling doubts stemming from a recent adverse state court order, the Michigan PSC reported also that as of Oct. 1, some 57 bidders from Michigan, Ohio, Wisconsin, Pennsylvania, Georgia, Arizona and New Jersey had submitted bids totaling 1,124 MW of capacity to sell into the first round of the state's electric choice program.
Detroit Edison and Consumers Energy have agreed to open their markets voluntarily even though the state Supreme Court has ruled that the PSC lacks authority to mandate participation without enabling state legislation.
Enron Energy Services, a subsidiary of Enron, and Owens Corning have announced a more than $1 billion ten-year outsource agreement for total energy management services at 20 of Owens Corning's major manufacturing facilities located throughout the United States. Under the agreement, Enron and Owens Corning jointly will implement an energy savings program designed to decrease energy consumption and lower costs for Owens Corning. Enron will supply or manage all energy commodity requirements including electricity and natural gas, mitigate risks of price volatility using its expertise in managing large commodity portfolios, and build energy infrastructure projects.
Energy Research Corp. and the Advanced Technology Division of Bath Iron Works, a General Dynamics Co., have formed a partnership to develop an advanced carbonate-based fuel cell energy plant for defense marine applications. The partnership involved an effort to improve ship electric power generation, also known as ship hotel power, with the development of the high-efficiency Direct FuelCell (DFC() Ship Service Power Plant. "The establishment of this alliance marks the beginning of a process we believe will lead to the development of the first new power generation technology for surface ships since nuclear power was adopted for aircraft carriers," said Jerry Leitman, president and chief executive officer of ERC.
Framatome Technologies Inc. and Siemens Power Corp. have signed a memorandum of understanding that eventually will lead to the two companies working together to provide chemical cleaning for nuclear power plant steam generators in the United States. It is expected that the memorandum will lead to a teaming agreement for the two companies to work together to apply Siemens' High Temperature Chemical Cleaning process to nuclear power plant recirculating steam generators.
CellNet Data Systems and Northern States Power have signed a letter of intent to expand the CellNet network for Northern States by approximately 800,000 electric and gas meters, providing network meter reading services to a total of nearly 2 million customers. This agreement marks the fourth contract expansion for CellNet with its major network customers in just over a year.
Convergys has signed a 10-year outsourced billing and customer care contract with Nicor Energy LLC, a Midwestern supplier of natural gas, electricity and energy-related services, whereby Nicor will use the Convergys managed services billing and customer care solution to support its natural gas, residential, industrial and commercial customers in the greater Chicago area and Northern Indiana. The Convergys utility billing and customer care solution automates and supports all aspects of customer service, from customer acquisition through service set-up and account management to billing.
News Digest was compiled by Carl J. Levesque, associate editor, Lori A. Burkhart and Philip Cross, contributing legal editors, and Bruce W. Radford, editor-in-chief. For continual news updates, see www.pur.com.
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