POWER PLANT SALE. Central Maine Power Co. has agreed to

sell its hydroelectric, fossil and biomass power plants totaling 1,185-MW of generating capacity to FPL Group, the holding company of Florida Power and Light. The sale price of $846 million exceeds book value and could permit up to a 10-percent rate cut for customers by the end of the year.

OHIO/TEXAS DEAL. Ohio-based American Electric Power

Co. and Texas-based Central and South West Corp. on Dec. 22 announced that they have entered an agreement to merge, creating a company with a total market capitalization of about $28.1 billion. The companies anticipate merger-related savings of about $2 billion over a ten-year period but estimated 1,300 out of a total of 25,000 domestic jobs will be lost.

CAJUN BANKRUPTCY. Entergy Gulf States has acquired the

30-percent share of the River Bend nuclear power plant formerly owned by Cajun Electric Power Cooperative Inc. Entergy now has 100-percent ownership of the plant. The acquisition was part of a larger agreement ending a series of disputes between the two companies that spawned litigation for eight years. Entergy Gulf States took title to Cajun's interest in River Bend from Cajun's trustee in bankruptcy, Ralph R. Mabey, at the direction of the Rural Utilities Service, formerly the Rural Electrification Administration, the major secured creditor in Cajun's ongoing bankruptcy case.

PLANS TERMINATED. Baltimore Gas and Electric Co. and

Potomac Electric Power Co. have terminated plans to merge to form a new company, Constellation Energy Corp. The two companies cited financial conditions imposed by the District of Columbia and Maryland commissions as reason to cancel their plans. "We have tried unsuccessfully to obtain reconsideration of these conditions," said BGE's Chairman and CEO Christian H. Poindexter and PEPCO's President and CEO John M. Derrick Jr. "But [we] now conclude that a favorable outcome cannot be expected within a reasonable period, if at all." The proposed merger also was plagued by lawsuits filed by union workers.

Power Pools & ISOs

NEW YORK POWER POOL. The New York Power Pool on

Dec. 19 filed supplemental information on plans by member systems to create an independent system operator. It has asked the FERC for approval by March 31, 1998, to allow the ISO to become operational by June 30, 1998. The proposal calls for use of locational-based marginal pricing for both electricity sold in the competitive spot market and for transmission service.

SOUTHWEST POWER POOL. The Southwest Power Pool on

Dec. 19, 1997 filed at the FERC its open-access electric transmission tariff, which would allow one-stop shopping for short-term firm and nonfirm point-to-point transmission service across seven southwestern states. If approved, the tariff would become effective in April, and would partly supersede present tariffs on file by member utilities. The tariff provides for rates designed on a distance-based "megawatt-mile" method, which establishes a link between the reservation, scheduling and compensation for transmission service and the anticipated impact of such service on the transmission system. In so doing, the megawatt-mile method replaces the present contract-path method and addresses rights to available transfer capability of the interconnected transmission system.

Environmental Issues

NOx ABATEMENT. New York's investor-owned utilities and

independent power producers have agreed to reduce nitrogen-oxide emissions from power plants. Under the settlement, the utilities and the IPPs have decided how to divide the state's annual allotment of NOx emissions for the years 1999 through 2002. They anticipate the plan will allow New York to reach its goal of reducing NOx emissions by 44 percent by 1999 and by 62 percent by 2003, compared with 1990 levels.

Federal Agencies

PURCHASED-POWER ARBITRATION. A federal arbitrator has

ruled in favor of Basin Electric Power Cooperative in a purchase-power contract dispute with Montana Power Co. Arbitrator Jon Lotis ruled valid and binding the contract requiring Montana Power to purchase 98 MW of power from the co-op over 15 years for about $100 million at present market conditions. Basin Electric also was awarded more than $6.3 million in damages plus interest for the first year of the contract. "I think it also sends a message to others who might be thinking about reneging on power contracts in these unsettled times," said Bob McPhail, Basin Electric general manager. "It is a message that needs to be sent throughout the country as the electric utility industry undergoes deregulation."

State Legislatures

VIRGINIA RESTRUCTURING. Virginia Sen. Jackson E. Reasor

Jr., chairman of a joint electric deregulation committee, plans to introduce an electric restructuring bill in the 1998 Virginia legislative session, which runs from Jan. 14 to March 14, for consideration in 1999. Meanwhile, Virginia Electric Power Co. plans to introduce legislation in 1998.

OHIO RESTRUCTURING. The Ohio Legislature's Joint Select

Committee on Electric Deregulation has released its report, Competition: Ohio's Choice, which calls for full retail electric competition starting Jan. 1, 2000. For five years, ending Dec. 31, 2004, Ohio would be divided into retail marketing areas. Generation service for all customers in each area would be aggregated and bid out.

Courts

STRANDED COSTS. The Massachusetts Supreme Judicial Court has reversed and remanded an order by the state's Department of Public Utilities (now the Department of Telecommunications and Energy) that denied recovery of stranded costs after the Stow Municipal Electric Department "municipalized" and took over facilities of Hudson Light and Power Department to lower rates. The move saddled Hudson with unrecovered costs for buying high-cost power from the Massachusetts Municipal Wholesale Electric Co. State regulators had said that Hudson's rates would decline anyway, whether or not it lost the Stow account, but the court said that ignored the fact that Hudson ratepayers would still pay higher rates with Stow's departure from the system. Stow Mun. Elec. Dept. v. Mass. DPU, Nos. sjc-07350 et al., Dec. 30, 1997 (Mass.) 1997 wl 792398.

COAL BUY-OUT COSTS. An Illinois appeals court has reversed a state commission order that had allowed Central Illinois Public Service Co. and Central Illinois Light Co. to recover coal supply contract buy-out payments through the fuel cost adjustment clause. It said that such cost could not qualify as direct costs of fuel. Archer-Daniels-Midland Co. v. Ill. Commerce Comm'n, No. 3-97-0170, Nov. 24, 1997 (Ill.App.3d.Dist.) 1997 wl 731547.

TELCO PRICE-CAP PLANS. Reversing an order by the state's Commonwealth Court, the Pennsylvania Supreme Court has in effect reinstated a 1994 state PUC order that approved a price-cap plan for Bell Atlantic-Pennsylvania, with the cap keyed to the rate of inflation minus a 2.93 percent offset for productivity. The lower court (669 A.2d 1029) had said the PUC lacked evidence to find that certain services were competitive, and had required the PUC to adjust the offset by an "input price differential" to reflect alleged cost differences between the telecommunications industry and the economy as a whole. Popowsky v. Pa. PUC, Nos. 101 et al., Dec. 24, 1997 (Pa.) 1997 wl 786906.

Business Wire

CMS Energy will begin an experimental pilot program allowing up to 300,000 natural gas customers to chose their gas suppliers over the next three years. According to CMS, the gas choice plan is the largest and most far-reaching of its kind.

Energis Resources has secured more than 700 new business customers since the beginning of the Pennsylvania Pilot Program. Energis Resources, a subsidiary of Public Service Enterprise Group Inc., was one of 43 electric generation suppliers licensed to participate. The company's new business customers translate into more than 350 million kilowatt-hours in sales.

Electric Lite signed a deal with Illinova Energy Partners to purchase power for its customers in Portland General Electric's pilot program. Electric Lite enrolled nearly 1,500 customers and began delivering power on Dec. 1, 1997. The power supply agreement is a fixed-price, full-requirements contract. Illinova will serve as Electric Lite's scheduler.

El Paso Field Services, a business unit of El Paso Energy Corp., purchased a natural gas gathering and processing system for $196.5 million from TPC Corp., a wholly owned subsidiary of PacifiCorp.

Air Products and Chemicals Inc. signed two, multi-year contracts to provide on-site gas management services to the LaPorte, Texas E.I. du Pont de Nemours and Co. plant and the Chaulk River Atomic Energy Canada Limited Facility. Services include placing Air Products employees at both customers' sites to assume responsibility for the facilities' industrial and specialty gas requirements, daily deliveries, logistical support and key administrative operations.

Madison Gas and Electric Co. issued a request for proposal for construction of up to 100 megawatts of electric capacity to be provided by a new power plant. MGE is promoting construction of a single, 500-MW unit.

State PUCs

POWER CHOICE PLANS. The Michigan commission approved

plans by Consumers Energy Co. and Detroit Edison Co. to allow all customers to choose electric suppliers, as required under the PSC's 1997 restructuring ruling, which requires a phase-in through 2001. The PSC directed the utilities to use a bidding process to recover stranded costs and to allocate open-access load among participating

customers during the phase-in. Bid rules must contain a mandatory minimum bid requirement of 0.5 cents per kilowatt-hour for transition cost recovery. It also authorized the electric utilities to suspend their existing power supply cost-recovery mechanisms during the retail access phase-in period. Case Nos. u-11451, u-11452 (direct access plans), u-11449, u-11453 (power supply adjust.), Oct. 29, 1997 (Mi.P.S.C.).

STRANDED-COST TRUE-UP. The Michigan PSC has adopted a true-up mechanism that compares stranded-cost estimates and the actual prices paid by direct-access customers for power. Case No. u-11454, Oct. 29, 1997 (Mi.P.S.C.).

CONSUMER EDUCATION. The Maine commission proposed rules to implement a consumer education program on plans to open electricity to retail competition, now set for March 1, 2000. The proposal sets a maximum funding level for the program of $1.6 million, or $3 per capita. The plan would have transmission and distribution utilities provide funds for educational activities and recover the amount from ratepayers. The companies will distribute the required market information, primarily as bill inserts. Docket No. 97-583, Nov. 3, 1997 (Me.P.U.C.).

POWER CHOICE PLANS. The New York commission approved

modified rate and restructuring plans for both Rochester Gas & Electric Corp., and Orange and Rockland Utilities Inc. Both plans allow for the development of competition and provide significant rate reductions of more than $80 million during the transition to a fully competitive electric market. Re Docket Nos. 97097, 96e0898, 96e0900, Nov. 25, 1997 (N.Y.P.S.C).

PERFORMANCE-BASED RATES. The Michigan commission will

allow Consumers Energy Co. to implement a rate freeze and a performance-based rate mechanism for distribution and customer charges when competitive suppliers serve 5 percent of its load. The PBR mechanism would tie base-rate adjustments to changes in a weighted composite of Producer Price Index data for capital investment, electric transmission and distribution equipment and compensation for utility and transportation employees. This method will measure cost changes experienced by the utility rather than by its ratepayers. Case No. u-11456, Oct. 29, 1997 (Mi.P.S.C.).

COGENERATION. The Maine commission plans to update its

rules governing cogeneration and small power production purchases by electric utilities. Maine's new electric restructuring law relieves utilities of any obligation to enter long-term agreements to buy power from QFs, but requires the PUC to continue to establish short-term energy-only rates to fulfill the terms of existing QF contracts. The proposal would eliminate utility filing requirements for long-term load forecasts, energy resource plans and avoided-cost calculations. It would abandon existing avoided-cost methods in favor of a choice between two alternatives: (a) a method based on clearing prices at the New England Independent System Operator, or (b) an administrative determination bolstered by new market information. Docket No. 97-794, Oct. 31, 1997 (Me.P.U.C.).

ELECTRIC METER READING. The New Jersey board has

approved a proposal by Rockland Electric Co. to provide monthly meter readings for its residential customers, most of whom are currently on bimonthly billing, to adapt to pricing options offered by alternative suppliers. The company said the switch would be "revenue neutral," due to an agreement with its workers through the International Brotherhood of Electric Workers local. Under the agreement, the union will agree to a new meter reading job classification at a lower hourly wage. All incumbent meter readers are grandfathered under the agreement and the utility agreed to discontinue the use of outside contractors in the meter reading function. Docket No. et97080583, Nov. 6, 1997 (N.J.B.P.U.).

GAS COST RECOVERY. The Wisconsin commission has approved a performance-based gas cost recovery mechanism for Wisconsin Gas Co. It will tie recovery of commodity costs, supplier reliability premiums, storage costs pipeline capacity costs and risk management costs to observed performance against commodity price indices drawn from the publication Inside FERC and other operational indicators such as expected injection volumes for storage. Docket No. 6650-gr-113, Oct. 30, 1997 (Wi.P.S.C.).

BABY BELL LONG DISTANCE. The Washington commission issued a policy statement on tests that U S WEST Communications Inc. must pass to qualify to offer competitive interLATA long-distance service under the Federal Telecommunications Act of 1996. It will examine approved interconnection arrangements between the U S WEST and competitors in local markets to ensure local access service is adequate and a significant level of competition exists. Docket No. ut-970300, Oct. 24, 1997 (Wash.U.T.C.).

ELECTRIC HOLDING COMPANY. The Arizona Corporation Commission allowed Tucson Electric Power Co. to form a holding company, UniSource Energy. Commissioners approved a financing application that allows TEP to replace the credit agreement resulting from a 1991 bankruptcy court action and to refinance $184 million in bonds. Nov. 19, 1997 (Ariz.C.C.).

UNIVERSAL TELEPHONE SERVICE. The New Jersey board has

adopted a definition of universal service for the telecommunications industry. The definition includes: a white pages listings, voice-grade access to the public network; the ability to place and receive calls; touch-tone or dual-tone multifrequency signaling or its equivalent; single-party service; access to emergency, operator and inter-exchange services; and access to directory assistance. The board said that further study was needed to set the appropriate level of local usage to include in the definition. It also ruled that carriers receiving universal support for lifeline service are prohibited from disconnecting customers for nonpayment of toll charges. Docket No. tx95120631, Oct. 29, 1997 (N.J.B.P.U.).

BABY BELL LONG DISTANCE. The Florida PSC found that Bell

South Telecommunications Inc. has met only some of the requirements necessary to enter the interLATA long-distance market under the Federal Telecommunications Act of 1996. It found that newly certified competitive carriers were serving about 27,000 business subscriber access lines in the state, but that Bell South had failed to submit sufficient evidence of competitive local service. It said Bell South was having problems fulfilling requests from new market entrants and meeting other requirements set up by the Federal Communications Commission. Docket No. 960786-tl, Order No. psc-97-1459-fof-tl, Nov. 19, 1997 (Fla.P.S.C.).

CABLE TV SUBSIDY. The Massachusetts Department of Tele-

communications and Energy has opened an investigation into whether Boston Edison Co. improperly subsidized a cable television and telecommunications venture, Residential Communications Network, through an unregulated subsidiary, The Boston Energy Technology Group, by investing more money than authorized, or for lines of business not previously approved. (D.P.U. 97-95).

Boston Edison, through its affiliate, Boston Energy Technology Group, is involved in a joint venture with RCN to provide cable and telecom services in Massachusetts, and has granted access to RCN to fiber-optic network lines, rights of way and customer lists. In 1993 the department had granted authority to Boston Edison to invest $45 million in Boston Energy Technology Group only for three purposes: demand-side management, electric vehicles and electric generation services.

News digest compiled by Lori A. Burkhart and Phillip S. Cross,

contributing legal editors, and Beth Lewis, editorial assistant.

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