CONSUMER FRAUD. The National Association of Attorneys
General, meeting Nov. 18 in Washington, D.C., to discuss electric restructuring, issued a warning to electric consumers on fraudulent schemes and abusive practices by scam artists. The warning encourages consumers to check their electric bills for unusual provider names or charges, and to avoid participating in contests that require a signature that can be used to switch an account.
RATE REDUCTION BONDS. A new report from Fitch Investors
Service, California Direct Access Customer Plan, highlighted the credit implications for utility distribution companies and investors in the rate reduction bonds to be issued by special trusts of the California Infrastructure and Economic Development Bank. Fitch said that on balance, the mechanisms offer satisfactory protection for the credit of the companies and potential rate-reduction bondholders. About $6.2 billion of bonds have been issued for the state's largest IOUs: Southern California Edison, Pacific Gas and Electric, and San Diego Gas and Electric.
STRANDED COSTS. Government should help electric utilities
recover stranded costs, according to a new report released Nov. 18 by the Edison Electric Institute, since government allowed utilities to accumulate sunk costs and inefficiencies incompatible with a competitive regime. In their report, The Path of Least Resistance: Accelerating the Movement to Electric Industry Competition Through Transition Cost Compensation, authors Philip R. O'Connor and John L. Domagalski of Coopers and Lybrand argue that policymakers have long recognized a need to recover transition costs in deregulating other "network" industries, such as airlines, railroads, trucking, telecommunications and natural gas.
PUBLIC POWER FINANCING. Sen. Frank Murkowski, chairman
of the Senate Energy Committee, introduced a bill allowing municipal utilities to participate in open-access programs without violating "private-use" restrictions and thus jeopardizing the tax-exempt status of tax-exempt bonds already issued. Participating munis would forego any future tax-exempt financing, and could retire outstanding bonds subject to private-use restrictions over an extended period.
NUCLEAR WASTE BILL. The U.S. House of Representatives
voted 307-to-120 to pass the Nuclear Waste Policy Act of 1997, which authorizes a central temporary storage facility for the nation's high-level nuclear waste. The bill puts temporary storage and permanent waste disposal programs on sound financial footing by funding the programs directly from electric consumers. The Senate passed companion legislation in April. The bill cannot be passed until Congress returns from its recess this month.
Mergers & Acquisitions
LILCO "BAILOUT." The Citizens Advisory Panel and NYPIRG
filed a petition with the New York State Supreme Court in Albany claiming that the Public Authorities Control Board violated state law on July 16 when it approved a partial takeover of Long Island Lighting Co. by the state-run Long Island Power Authority without conducting an environmental review. The groups called the takeover a "bailout" plan at the expense of ratepayers, noting that LIPA would finance the takeover through $7.3 billion of tax-exempt bonds. The PACB is a little-known state agency made up of representatives from the Office of the Governor and leaders of the state Assembly and Senate.
CO-OPTING" PSNH. New Hampshire Electric Cooperative
Inc. on Nov. 12 offered to buy the transmission and distribution operations of Public Service Co. of New Hampshire for $1.4 billion in cash. The co-op proposes to cut PSNH electric rates by 20 percent, and at the same time allow more than 90 percent of the utility's electric customers to acquire direct ownership and control of their electric utility provider. PSNH is unlikely to accept the offer.
GO-SLOW" APPROACH. A Utah legislative panel decided not to move forward on an electric restructuring bill, instead deciding on further study. Electric deregulation and customer choice task force members have concluded six months of hearings and have found that restructuring is too complex to push through the next legislative session.
ILLINOIS RESTRUCTURING. The Illinois Legislature approved an electric restructuring bill Nov. 17, requiring customer choice May 1, 2002. But Illinois Gov. Jim Edgar has expressed some concerns with the bill, which requires a 20-percent residential rate cut for customers of Commonwealth Edison Co. and an initial 15-percent rate cut for customers of Illinois Power Co. The bill allows for stranded cost recovery after mitigation and for securitization. Edgar has until Jan. 28 to decide whether to sign.
ELECTRIC RESTRUCTURING. The Massachusetts Legislature on Nov. 19 approved a bill to restructure the state's electric industry. Massachusetts Gov. Paul Cellucci signed the bill on Nov. 25, 1997. The bill gives customers a 10-percent rate cut by March 1, and another 5-percent cut when utilities divest their generation assets about 18 months later. The bill would allow utilities to recover "legitimate" stranded costs.
NUCLEAR WASTE. A federal appeals court ruled the Department of Energy is responsible for the storage costs of spent nuclear waste at the nation's nuclear power plants. DOE is obliged by law to develop a repository, slated for Yucca Mountain, Nev., but has been slow to move forward. Customers of nuclear utilities have paid billions to fund the repository. The utilities likely will work out a settlement regarding the amount they will reimburse to customers. Northern States Power Co. v. DOE and the United States of America, Civ. Action No. 97-1064, Nov. 14, 1997 (D.C.Cir.).
INTERSTATE MERGER. Commission granted conditional approval of the proposed merger of Interstate Power Co., IES Industries, and WPL Holdings Inc., to form a new holding company, Interstate Energy Corp., on finding that the merging companies had taken steps to mitigate transmission market power in the Wisconsin Upper Michigan System and had agreed to file a proposal for an independent system operator without four months after merger approval. Opinion No. 419, Docket Nos. ec96-13-000, et al., Nov. 12, 1997.
TRANSMISSION PRICING. Marking a distinct contrast with the design of the PX and ISO in California, the Commission approved an independent system operator for the Pennsylvania-New Jersey-Maryland Interconnection that will administer both bilateral schedules and a cash spot market, while also maintaining reliability and dispatch. The decision, a victory for the so-called PJM "Supporting Companies," also approved locational marginal pricing based on bids in the spot market to determine rates for transmission service, plus a system of fixed transmission rights to manage line congestion. Docket No. oa97-261-000, Nov. 25, 1997, 81 F.E.R.C. ¶ 61,257.
GRI FUNDING. The Commission approved the 1998 budget for the Gas Research Institute, while referring a proposed settlement to an administrative law judge that would continue GRI's current funding through 2002, and then set up a voluntary funding mechanism for so-called "core" R&D. Docket Nos. rp97-149-002 et al., Nov. 12, 1997.
GAS BUSINESS PRACTICES. The FERC has issued a notice of proposed rulemaking and statement of policy governing standards for business practices and electronic communications between interstate natural gas pipelines, incorporating the most recent versions of standards declared by the Gas Industry Standards Board. The FERC added proposed rules not developed by GISB governing intra-day nominations, operational balancing agreements, netting and trading of imbalances, standardization of communications and notices of operational flows. Order No. 587-f, Docket No. rm96-1-007, Nov. 12, 1997.
MARKET-BASED RATES. The Commission allowed Hydro-Quebec to sell electricity at market-based rates in the U.S. through an operating subsidiary, H.Q. Energy Services, Inc., after finding special factors that it said would offset the applicant's failure to prove a lack of market power in generation, as indicated by market shares ranging from 27 to 35 percent of installed capacity and from 31 to 38 percent of uncommitted capacity in 13 U.S. markets. The FERC said Hydro-Quebec was already selling power at the U.S.-Canadian border at rates not subject to FERC jurisdiction. Docket No. er97-851-001.
THE New York Mercantile Exchange and the International
Petroleum Exchange, have announced an agreement to develop an advanced electronic trading system jointly to serve the oil, natural gas, electricity and coal industries. The system will be based on the IPE's Energy Trading System as the core platform, incorporating the functions of the NYMEX ACCESS system.
Associated Industries of Massachusetts and AllEnergy Marketing Co. have formed an energy purchasing cooperative. The focus is on providing natural gas and energy management services to companies in Bay State Gas Co.'s territory.
City Public Service awarded the Bentley and NetSpace project team a contract for an integrated automated mapping/facilities management and geographic information system.
Mexico's Comisión Reguladora de Energiá awarded a natural gas transportation permit to Energiá Mayakan S. De R.L. de C.V. that allows Mayakan to build and operate a natural gas pipeline, providing natural gas transportation for 30 years. The 700-kilometer pipeline is worth about $260 million. The project, sponsored by TransCanada Pipelines Ltd. via TransCanada International, begins construction in early 1998.
Mincom Inc. with Coopers & Lybrand LLP's Utility Industry Consulting Group signed a contract to provide complete operations, materials and financial management software systems to Hawaiian Electric Company Inc. Mincom will provide all application software, while Coopers & Lybrand will manage implementation and installation.
ELECTRIC CHOICE PLANS. The staff of the Mississippi commission has called for state legislation in 1999 to allow unbundled electric rates for all customers on Jan. 1, 2000, and retail competition by Jan. 1, 2001. The plan would apply to Mississippi's two IOUs, Entergy-Mississippi and Mississippi Power Co., as well as other companies electing to participate. Each would separate into three separate entities: an energy service provider, a wires company and a system operator. All utilities would be allowed to petition to recover stranded costs through a nonbypassable wires charge. Proposed Transition Plan for Retail Competition in the Electric Industry, Nov. 10, 1997 (staff report, Miss.P.S.C.).
GAS RATE STABILITY. To combat gas price volatility, the New
York commission has directed each large natural gas local distribution company to offer a plan for providing gas to retail customers at a fixed price during the 1997-98 heating season. LDCs must fix the commodity cost of gas and may fix other cost elements, but at the same time may allow reconciliations to account for weather variations, pipeline rate hikes and the like. Also, utilities may limit the program to 10 percent of customers in each service classification. Case 97-g-0600, Oct. 7, 1997 (N.Y.P.S.C.).
UTILITY DIVERSIFICATION. The Maine PUC declined to establish a "per se" rule prohibiting electric companies from engaging in natural gas distribution, in light of the Legislature's recent actions permitting affiliates of electric transmission and distribution companies to market electricity. But in the case in question, it required Central Maine Power Co. to operate through a separate subsidiary to carry out its proposal to extend gas distribution service to unserved areas in the state. Docket No. 96-786, Sept. 26, 1997 (Me.P.U.C.).
WATER RETURNS. Massachusetts amended rules for water
utilities, lowering the overall permitted range for rate of return on common equity. It cut both the ceiling (from 16 to 14.5 percent) and the floor (from 13 to 11.5 percent). D.P.U. 96-90-a, Oct. 16, 1997 (Mass.D.P.U.).
OVERSEAS INVESTMENT. Michigan certified a plan by CMS Energy Corp., an affiliate of Consumers Energy Co. (the combined electric and gas utility), to invest in energy ventures in Brazil. The company plans to buy electric distribution companies offered for sale as part of industry privatization efforts under way in the Brazilian state of Rio Grande do Sul. It also plans to bid on developing a liquefied natural gas system in the Brazilian state of Amazonas, and to join with a consortium of other investors in buying an electric utility in the state of São Paulo. Case Nos. u-11519, u-11520, Oct. 15, 1997 (Mich.P.S.C.).
STRANDED COSTS. New Jersey limited the use of securitization plans by electric utilities to recover only 50 percent of stranded costs. The board imposed a series of tests to qualify for securitization and noted that final securitization percentage, as well as the total amount of stranded costs allowable by any means, will depend upon the depth of rate reductions achieved by utilities in their restructuring proposals. Docket Nos. ex94120585y, Sept. 19, 1997 (N.J.B.P.U.).
GAS SUPPLY CONTRACTS. Indiana won't disapprove contracts
by two distributors, Citizens Gas and Coke Utility and Indiana Gas Co., to purchase wholesale gas supply from Proliance Energy LLC, a marketing affiliate, despite charges by industrial users and others that the deal would not ensure the lowest-cost gas supply for utility customers. The state commission finds no evidence of intent to circumvent regulation, but says it will monitor quarterly gas cost filings by both utilities. Case No. 40437, Sept. 12, 1997 (Ind.U.R.C.).
ELECTRIC SERVICE OFFERS. Maine proposed rules for "stan-
dard offer" electric service to comply with the state's new electric restructuring law, which promises electric supply choice for all retail customers by March 1, 2000. The rules set out a bidding process to select suppliers and govern terms and conditions of service, which the PUC said should remain similar to electric service now available from utilities. Docket No. 97-739, Sept. 30, 1997 (Me.P.U.C.).
APPLIANCE REFERRALS. The State commission said Nevada
Power Co. violated utility rules by providing a dealer referral service for installation of new air conditioning and heating equipment without an approved tariff. It said that the utility offered the program directly, as opposed to through an affiliate, and must stop referring dealers to customers. Docket No. 96-12013, Aug. 13, 1997 (Nev.P.S.C.).
Lori A. Burkhart and Phillip S. Cross are contributing legal editors and Beth Lewis is editorial assistant with Public Utilities Fortnightly.
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