MAINE YANKEE PRUDENCE. The Maine Public Utilities

Commission will investigate the prudence of Maine Yankee Atomic Power Co.'s decision to close its nuclear plant permanently.

The PUC said Oct. 22 that unrecovered investment in Maine Yankee combined with the loss in plant value could cause additional stranded assets for plant owners Central Maine Power Co., Bangor Hydro-Electric Co., and Maine Public Service Co. If imprudent action is found, the PUC said it would take steps to ensure that Maine's electric ratepayers do not bear any related costs. The investigation is expected to conclude in mid-1998.

A PUC-ordered management audit of Maine Yankee in September found that $95 million of the costs from January 1994 through June 1997 were imprudent.

ENTERGY COMPETITION PLAN. The Texas Public Utility Com-

mission has directed Entergy Gulf States Inc. to use an outside mediator to resolve issues concerning its transition to competition plan and rate requests filed with the PUC.

According to PUC Chairman Pat Wood, mediation will provide one last chance to settle the case, after a failed attempt in September 1997.

Entergy had asked to reconcile and recover fuel costs, set revised fuel factors and establish new base rates, increasing revenue from fuel and purchase power by $14 million. It also wants a surcharge to recover $41.4 million it believes was not recovered on fuel expenses, and a rate increase of $19.6 million.

Entergy's plan, filed Nov. 27, 1996, promises full retail competition in 2004.

WATER UTILITY MERGERS. The California Public Utilities

Commission has invited comments on its proposal to change its rules and guidelines for water utility mergers and acquisitions.

The PUC wants to provide incentives for mergers and acquisitions that benefit ratepayers. It seeks comments consistent with new legislation setting fair market value as the standard for assessing reasonableness of the acquisition price. The PUC said it usually supports the acquisition of small, troubled water companies by larger ones to solve the former's financial and water quality problems.

CONSUMER FINANCE CHARGES. Watchdog group The

Utility Reform Network has filed a lawsuit to compel the California Public Utilities Commission to require utilities to disclose the finance charges that each California resident must pay starting Jan. 1.

"Under the current commission decision, California's consumers get better information from used car dealers than they will get from their electric utilities," said TURN Executive Director Nettie Hoge.

Residential and small commercial customers will pay a fixed transition charge of 1 to 2 cents per kilowatt, or about $7.60 a month. The charge pays principle and interest for securitization of stranded costs and will last for 10 years.

According to TURN, the PUC will only require disclosure of the FTA on monthly electric bills "if practicable."

Public Power

L.A. CUTS JOBS, RATES. The Los Angeles Department of Water

and Power said it would slash debt and lay off workers, but might be able to eke out a rate cut for residential customers under its new plan to remain competitive.

The DWP, the nation's largest municipal utility, announced its restructuring plan Oct. 29.

The city has guaranteed no rate hikes for its customers and proposes to cut residential rates by 5 percent by January 2002, though it claims its rates are already 30 percent lower than those of competing utilities. For business customers, DWP proposes cutting rates to at or below market level by 2002.

DWP will restructure its electric business into separate operating companies for generation, transmission and distribution. The generation business is already saddled with $4 billion in debt from plants constructed in the 1980s. To help trim debt, the DWP proposal calls for eliminating upwards of 2,000 positions by next month. The plan also proposes selling assets such as surplus real estate and 600 cars from its fleet. A series of community forums were held on the proposal, and it has been approved by the board of commissioners.

Congress

SULFATE EMISSIONS, NOx. Reps. Frank Pallone Jr.

(D-N.J.)and Tom Campbell (R-Calif.) intro-duced legislation to amend the Federal Power Act to create an emissions allowance program for certain air pollutants.

The Nov. 6 bill would cap total utility emissions for NOx and sulfate fine particles and would require the FERC to calculate a generation performance

standard for each pollutant. The FERC would then allocate emission allowances for each pollutant to all generators covered by the legislation. To ensure allowances are awarded based on efficiency, a generator's total electric output would be multiplied by the generation performance standard.

The bill sets a penalty for noncompliance at $5,000 per ton for emissions exceeding credits held by any generator.

The bill would affect coal, gas and oil-fired generators that produce at least 15 MW of electricity per year and those powered by renewable energy sources.

FERC

GAS PIPELINE RATES. The Commission has approved rolled-in rates for construction and operation of about 96 miles of new natural gas pipeline for Transcontinental Gas Pipe Line Corp.'s Mobile Bay, Ala., offshore facility (Docket Nos. cp97-92-000, cp97-92-001).

Transco said it qualified for rolled-in rate treatment under the commission's 1995 pricing policy for new and existing pipelines. (See Policy Statement, 71 FERC ¶ 61,241.) It said rolled-in rates would increase costs for existing customers by less than 5 percent, the maximum permitted for a presumption for the rates. Transco also said the pipeline will have an operational or financial benefit, as required by the policy.

The FERC agreed in its Oct. 29 order that Transco qualified for the rates but questioned the result in its public meeting. New customers had argued they would not benefit from the expansion but could end up paying higher rates.

HYDRO LICENSING. The Commission has approved a final rule establishing expedited procedures for hydroelectric plant licensing, formalizing methods that had been used voluntarily for several years (Docket No. rm95-16-000, Order No. 596).

The rule, urged by the National Hydropower Association, can shave years from the lengthy licensing process. The new procedures allow pre-filing consultations, environmental review and discussions of potential conflict to occur simultaneously. The new approach will remain voluntary.

The FERC in its Oct. 29 ruling said the new method has been used successfully in the relicensing of the large St. Lawrence Seaway project on the Canadian border near Massena, N.Y.

FIRSTENERGY APPROVAL. FERC on Oct. 29 conditionally approved the merger of four Ohio- and Pennsylvania-based utilities to form FirstEnergy Corp. (Docket No. ec97-5-000).

Ohio Edison Co., Cleveland Electric Illuminating Co., Toledo Edison Co., and Pennsylvania Power Co. have estimated they will save $1 billion in the first 10 years after approval.

To eliminate possible anticompetitive effects of the merger, the applicants made several commitments to municipal system customers, including access to, availability of, and pricing of transmission capacity internal to the FirstEnergy system.

FERC also suggested greater operational separation of transmission and generation. The Commission expects the utilities to participate in the Midwest Independent System Operator or another appropriate regional ISO.

Power Pools & Reliability

NEPOOL NOx AUCTION. The New Eng-

land power pool has selected Natural Resources Group, an energy brokerage firm, to conduct an all-source, sealed-bid auction for up to 3,650 NOx emission reduction credits in the first quarter of 1998.

New England state environmental regulators ordered members of ISO New England, formerly NEPOOL, to deliver 3,647 tons of emission credits to offset increased NOx generated in summer 1997 to meet record electric demand. NEPOOL members decided to buy the credits in proportion to their capacity and cost obligations.

"This could very well be the first multi-state trading of NOx credits in the country," said NRG CEO Jack Cogen. He said auction participation will prepare parties for the possible 22-state NOx market the Environmental Protection Agency is considering.

NERC REGION SWITCH. Entergy Corp. plans to withdraw its membership from the Southwest Power Pool and to request membership in the Southeastern Electric Reliability Council. Entergy said the move would better align its transmission system with those of neighboring utilities to the east.

On Oct. 30, Entergy said that while electricity flowing through its transmission lines remains constant, the number of transactions on its system has increased over the last year.

"As the number of transactions increases, we need to take steps to ensure reliability of the system is maintained." said Andy Vesy, vice president of Entergy's transmission business. "Our concerns and those of SERC membership relating to reliability are very similar."

According to Entergy, the northern members of the SPP traditionally have been more affected by power flows from the operations of utilities in the Mid-Continent Area Power Pool, with which the SPP is considering a merger.

Studies & Reports

LOCAL TELCO SERVICE. Local telephone companies could lose

more than one-third of their residential customers as competition increases.

Aragon Consulting Group's study, What America Thinks: the People's Choice for Local Telephone Service, found that only 63.5 percent of residential customers would keep their local company if given the choice of subscribing from their current provider, a long-distance telephone company, an electric utility or a cable television carrier. About 14.5 percent of respondents said they would choose a long-distance provider for local service, 3.8 percent would choose an electric utility and 1.2 percent said cable carrier.

Consumers also were asked to rate the reliability of various services. Seventy-one percent of long-distance customers, 70 percent of local phone service customers, 64 percent of electric service customers and 32.9 percent of cable customers rated that service "very reliable."

TELCO COMPETITION. NARUC released Telecommunications Competition 1997, which collates information from all 50 states and the District of Columbia on local telephone competition. According to the study, state regulators have certified more that 1,110 new competitors, approved about 500 interconnection agreements and completed more than 180 arbitrations.

DEREGULATION DEVELOPMENTS. The Gas Research Institute's

latest report summarizes state-by-state progress on electricity deregulation, analyzing the potential impact of electric restructuring on the natural gas industry. Summary of State-Level Electric Utility Regulatory Developments Through June 1997 was prepared by Energy and Environment Analysis Inc. as part of the 1998 edition of the GRI Baseline Projection. According to the summary, the three issues slowing the progress of deregulation are: recovery of long-term costs, customer choice and decisions about rate caps or forced rate reductions. The report concluded that state-level actions on electric restructuring are likely to affect the natural gas industry and cause a decline in electricity prices and electric/gas convergence.

ONTARIO HYDRO MONOPOLY. The Ontario Conservative

government released a report detailing plans to introduce electric industry competition by 2000 and to end the monopoly held by Ontario Hydro.

The Nov. 6 "white paper," Direction for Change -

Charting a Course for Competitive Electricity and Jobs in Ontario, will serve as a basis for legislation, which is required for implementation.

The paper called Ontario Hydro's business record "unsatisfactory," based on a recent, "highly critical assessment of Ontario Hydro's nuclear division prepared by a team of U.S. experts." The paper attributed the company's problems to its status as a monopoly.

The government hopes to pass legislation in spring 1998. It plans to split Ontario Hydro into a holding company, an independent market operator and two operating subsidiaries: Ontario Electric Power Corp., which would own the utility's generation assets, and Ontario Electric Services Corp., that would manage transmission and distribution.

PUBLIC POWER LOSSES. The U.S. General Accounting Office

said the federal government is losing, and will continue to lose, billions of dollars supporting power marketing administrations, the Rural Utilities Service and the Tennessee Valley Authority as competition is introduced.

Federal Electricity Activities - The Federal Government's Net Cost and Potential for Future Losses found public power cost the federal government $2.5 billion in fiscal year 1996: $0.4 billion from Bonneville Power Administration; $0.2 billion from Southwestern, Southeastern, and Western PMAs; and $1.9 billion from RUS, including about $982 million in loan write-offs.

Cumulatively for fiscal years 1992 through 1996, the GAO estimates the government's net cost of operating these entities at $8.6 billion in constant 1996 dollars.

RESTRUCTURING SAVINGS. A second GAO report, Federal

Electricity - Retail Competition Could Create Government Savings, estimated the government could save $1 billion to $8 billion from 1998 through 2015 under deregulation, depending on future price and quantities. The report said the federal government spent about $2.8 billion in fiscal year 1995 for 50 billion kilowatts of electricity at an average price of 5.6 cents per kWh.

GAO said falling electric prices could cause the government to buy more electricity. Adjusting estimates to reflect that possible increase, the GAO estimated the government could still save $0.6 billion to $6.5 billion during the same period.

Business Wire

CMS ELECTRIC AND GAS and FondElec Group Inc. formed the

FondElec Essential Services Growth Fund LP to invest in Latin American electric and gas distribution systems. CMS Electric and Gas committed a $35-million investment. FondElec Group will manage the Fund. The fund's first venture was to acquire a minority stake in Companhia Forca e Luz Cataguazes-Leopoldina, a private electric utility, and an interest in Luz De Bogota S.A., the controlling shareholder of a utility in Bogota, Colombia.

SCT Utility Systems Inc., a division of Systems & Computer Technology Corp., signed a software agreement with the City of Charlotte, N.C. The agreement calls for the use of BANNER Customer Information, Electronic Work Queue and Customer Contact systems in the city's water, sewer and storm water services. The agreement is worth about $1.7 million. The systems should be in place by January 1999. The City of Palo Alto, Calif., signed an agreement with SCT to implement the BANNER Customer Information and Electronic Work Queue systems. The city serves electric, gas, water and sewer customers. The systems should be working by December 1998.

Astra Compania Argentina Peroleio S.A. and subsidiary Pluspetrol Energy S.A. joined as equity partners with the GasAtacama pipeline-power project being developed by CMS Energy Corp., and Empress Nacional de Electricidad S.A. Astra bought a 4-percent ownership and acquired a 16-percent interest through Pluspetrol Energy. The two companies exercised options to buy an equity position in the project when they signed firm, 15-year agreements to supply natural gas. GasAtacama, an integrated, $750-million pipeline power project will transport natural gas across the Andes Mountains from Argentina to Chile. A joint venture between Bonatti S.P.A. of Italy and CPC S.A. of Argentina will build the pipeline.

Lori A. Burkhart is a contributing legal editor to Public Utilities Fortnightly.

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