UTILITY HOUSE CALLS. Michigan Gov. John Engler (R) signed into law a bill making it a felony to impersonate a utility employee to enter private property for criminal purposes. The new law calls for those convicted to be imprisoned for not more than two years and to pay a maximum fine of $1,000, or both.
ELECTRIC RESTRUCTURING. Illinois Gov. Jim Edgar (R) signed into law an electric restructuring bill for the state. Edgar noted that concerns over the bill were addressed by the state's two largest utilities, Commonwealth Edison and Illinois Power Co. The companies agreed not to sell any power plants before a rate cut becomes effective Aug. 1. The bill, signed in December, calls for a 20-percent residential rate decrease for the two utilities; 15 percent on Aug. 1 and 5 percent on May 1, 2002.
MIDWEST ELECTRIC FUTURES. The Minneapolis Grain Exchange asked the Commodity Futures Trading Commission to approve its listing of electric futures and options contracts reflecting the value of electricity in seven midwestern states and two Canadian provinces. The contracts would be based on electric delivered in Minneapolis-St.Paul at facilities owned by Northern States Power. One contract would reflect the value of 736 megawatt-hours of peak electricity; the other would reflect off-peak deliveries of 368 Mwh.
Studies & Reports
HIGHER ELECTRIC RATES. Residents of Kentucky may pay much more for electricity because of changes in regulation of the power industry, according to a study released by agricultural economists with the University of Kentucky College of Agriculture. Electrical rates and usage patterns in four rural Kentucky counties were analyzed and showed that rates could increase almost 45 percent. Study projected probable effects on families, businesses and local economies if federal deregulation results in a more uniform national price for electricity.
RISING GAS USE. The American Gas Association released a forecast that said natural gas consumption would reach an all-time high in 1998, surpassing the record levels set in 1972. The A.G.A. sees natural gas use reaching 23.3 quadrillion Btu, or quads this year.
THE MUNICIPAL GAS AUTHORITY OF GEORGIA, representing 75 public agencies in three states, entered a 10-year natural gas supply contract with Columbia Energy Services, a Columbia Gas System subsidiary. The Gas Authority began purchasing 12 billion BTU per day of natural gas from Columbia on Jan. 1.
Eastern Enterprises agreed to acquire Essex County Gas Co. in a stock-for-stock transaction. Based on shares outstanding Dec. 1, the transaction has an equity value of $80.5 million, or $47.50 per share. When the merger is complete, Essex County Gas will operate as a wholly owned subsidiary of Eastern and as a sister company of Boston Gas Co.
Standard & Poor's will replace Union Electric Co. in the S&P 500 Index with Ameren Corp., the new company to be formed by the merger of Union Electric Co. and CIPSCO Inc.
Citizen Utilities acquired Ogden Telephone Co. by purchasing Odgen's common stock for about $23.5 million. Holders of a single share of Odgen common stock will receive about 18.5 shares of Citizen's common stock.
Otter Tail Power Co. will invest almost $3 million in energy conservation programs over the next two years. The investment, following approval by the Minnesota Department of Public Service, will be used for rebates, grants, energy-saving projects and other energy-efficient services.
Cinergy Services Inc. signed a $26-million, multi-year contract with Convergent Group for consulting and systems integration services.
CNG International Corp., a subsidiary of Consolidated Natural Gas Co., acquired interests in two Argentina gas companies and one Argentina electric company for $78 million. CNG purchased 12.5-percent interests in two gas utility holding companies, Sodigas Pampena and Sodigas Sur, and a 20-percent interest in Buenos Aires Energy Co., from CEI Citicorp Holdings Sociedad Anonima.
GAS PIPELINE CERTIFICATION. Independence Pipeline Co.
filed an amendment with the commission to its application to build 400 miles of 36-inch diameter pipe from Ohio to Pennsylvania. The amendment seeks authority to negotiate tariff provisions and for one major route change to the eastern portion of the original pipeline route. Independence Pipeline is a general partnership formed by subsidiaries of the Coastal Corp.'s ANR Pipeline Co., Williams' Transcontinental Gas Pipe Line Corp., and National Fuel Gas Co.
STRANDED COSTS; MUNICIPALIZATION. Commission staff rec-
ommended that the city of Las Cruces, N.M. pay $29.4 million to El Paso Electric Co. if the city condemns EPE's electric distribution facilities and forms a municipal electric utility. FERC staff concluded that EPE had a reasonable expectation of continuing to serve Las Cruces.
Mergers & Acquisitions
SETTING TAKEOVER PRICE. Western Resources Inc. and
Kansas City Power & Light Co. postponed their shareholder meetings set for Jan. 21 to vote on their proposed merger. Utility analysts say the delay is needed because of disagreement over the price that Western Resources will pay for Kansas City P&L. In the year since the merger was announced, the value (em based on a formula agreed to at the time (em has risen beyond the formula's parameters. Now, Western Resource would have to pay $36 per share; it doesn't believe it should pay more than $32 per share.
CHOOSING COMPANY NAME. Pacific Enterprises and Enova
Corp. announced the new name of their soon-to-be combined company: Sempra Energy, from the Latin word "semper," which means always. Stephen L. Baum, Enova president and CEO said Sempra was concise and easy to communicate in several languages.
GAS COST SECURITIZATION. The Montana Public Service
Commission issued a procedural order setting March 18 as the target date for a final order on a Montana Power Co. application. The order will address transition bonds for recovery of gas utility transition costs. Docket No. d97.1, Order No. 6035, Dec. 12, 1997.
PREDATORY PRICING. The California Public Utilities Com-
mission ruled that predatory pricing will not occur in the state's wholesale electric generation market when Southern California Edison Co. auctions its 12 fossil fuel generating plants. The PUC said that predatory pricing requires the ability to eventually charge supra-competitive prices to recoup the initial investment in below-cost, predatory rates. Plant buyers must get market-based pricing approval from the FERC to sell power from the plants. a.96-11-046, d. 97-11-075, Nov. 19, 1997 (Cal.P.U.C.).
POWER PLANT AUCTIONS. The New York Public Service Com-
mission has ruled that Orange and Rockland Utilities Inc. can bid in the auction of its own plants, subject to
certain conditions. The commission said the utility could participate in the auction because it does not possess horizontal market power and consumers might benefit. The commission made the ruling while approving the utility's revised restructuring plan, which contains an accelerated schedule for full retail access for all customers by May 1, 1999. Large customers can choose alternate suppliers under a special program one year earlier. Case 96-e-0900, Nov. 26, 1997 (N.Y.P.S.C.).
RETURN ON EQUITY. State regulators rejected calls by Public
Service Company of New Hampshire for "a premium rate of return on equity" to reflect increased risk caused by the state's electric restructuring plan. The commission rejected the utility's request for an ROE allowance of 17 to 19 percent and instead set the earnings level at 11 percent. The PUC also approved a temporary rate cut of 6.87 percent for the utility. The commission said the failure by the company to acknowledge that the price of its stock had fallen well before the issuance of the states' electric restructuring plan in 1996 "strains the bounds of credulity." dr 97-059, Order No 22,784, Nov. 6, 1997 (N.H.P.U.C.).
GAS PILOT PROGRAM. The Michigan Public Utilities Com-
mission has authorized Consumers Energy Co. to implement a voluntary experimental pilot program giving up to 300,000 sales customers the opportunity to choose an alternative gas supplier. To protect existing customers, the utility will freeze its noncommodity charges and gas commodity rate for three years. The plan allows the utility to share with ratepayers earnings attributable to noncommodity charges that exceed established levels. Limited base-rate reviews are also provided for in case of major changes in regulations, accounting requirements or taxes. Case No. u-11599, Dec. 19, 1997 (Mi.P.S.C.).
GAS CHOICE PROGRAMS. The Pennsylvania Public Utility
Commission said Equitable Gas Co. can implement a program allowing supply choice for all natural gas customers. The program marks the first full-scale gas unbundling plan to come before the commission. The new plan provides for full assignment to marketers of upstream capacity costs using a three-tier pool structure based on usage. According to the commission, the mandatory assignment of capacity at a federally approved rate would eliminate stranded costs and promote continued system reliability. r-00963858, Dec. 4, 1997 (Pa.P.U.C.).
TELCO EQUITY RETURNS. The Vermont Public Service Board
has reduced rates for a newly formed rural telecommunications local exchange carrier, Vermont Telephone Co. Inc., by 8.62 percent. It also set rate of return on equity at 11.9 percent, the low end of the range produced under the discounted cash flow method accepted in the case. The board said the lower figure was appropriate because the state's rural carriers appeared to face little threat from new market entrants. Docket No. 5904, Nov. 11, 1997 (Vt.P.S.B.).
TELECOM RESALE DISCOUNTS. The New Jersey Board of Public
Utilities issued a generic ruling governing interconnection rates charged by incumbent local exchange telephone carriers to competitive carriers. For unbundled network services, the board adopted the same principles underlying the total element long-run incremental cost method used by the Federal Communications Commission. It said the TELRIC method will reduce the incumbent LEC's ability to engage in anticompetitive behavior. The BPU set the wholesale discount at 17.04, for resellers using Bell Atlantic of New Jersey with operator service and at 20.03 percent without. Docket No. tx95120631, Dec. 2, 1997 (N.J.B.P.U.).
TELECOM REVENUES. The New Jersey Board of Public Utili- ties approved a plan by Jersey Central Power and Light Co. to offer fiber-optic and other telecommunications services to carriers through a corporate affiliate, but said that revenues from the arrangement should be used to reduce stranded costs rather than applied as a reduction to transmission and distribution revenue requirements. Docket No. ee97050350, Dec. 17, 1997 (N.J.B.P.U.).
TELCO PRICE CAPS. The Maine Public Utilities Commission
decided not to modify its price-cap plan for New England Telephone and Telegraph Co. to account for revenue changes that occur when customers migrate between service offerings as prices are raised and lowered under an index-rate mechanism. The commission concluded that the LEC should bear all the risks and reap all the benefits from its conscious choice to reduce some rates more than others. A method to shield the utility from such risk is inappropriate under incentive regulation, the PUC said. Docket No. 97-079, Nov. 25, 1997 (Me.P.U.C.).
PILOT PROGRAM REFUNDS. The Ohio Supreme Court ruled state regulators cannot order refunds of charges levied under a weather normalization program run by Columbia Gas of Ohio to levelize customer bills. However, consumer response to the experiment was negative due to higher-than-expected bills during an unusually warm winter when the program began. Some customers said the company had mislead them and had reaped a windfall. The court ruled the commission lacked authority to order refunds of rates paid under approved schedules. Lucas County Comm'rs v. Ohio PUC, 686 N.E.2d 501, Dec. 3, 1997 (Ohio).
APPLIANCE REPAIR SERVICE. The Iowa Supreme Court upheld a recently enacted state law prohibiting public utility companies from using rate-supported assets or employees in the provision of non-utility appliance repair and installation activities. The existing code had only required that a public utility should provide services to non-utility affiliates in a manner that "minimizes cross-subsidization or unfair competitive advantage." The court found that the additional restriction was a legitimate attempt by the state to place state utilities on a level playing field with other contractors providing similar services. UtiliCorp United Inc. v. Iowa Utils. Bd., 570 N.W.2d 451, Nov. 26, 1997 (Iowa).
Lori A. Burkhart and Phillip S. Cross are contributing legal editors and Beth Lewis is editorial assistant.
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