ELECTRIC RETAIL PRICES. The Energy Information Administration has released a new report finding that the average retail price of electricity has declined for the third year in a row and remained stable for the first nine months of 1997. According to Electric Sales and Revenue 1996, average residential electric prices declined slightly in 1996, the first drop for that consumer class since the EIA began collecting data in 1984. Overall average prices of electricity were down nearly 0.5 percent nationwide between the end of 1996 and 1997, while industrial prices were down more than 1 percent. In California, residential prices dropped by 2.4 percent in 1996. The EIA believes three reasons account for the lower prices: falling fuel prices; decreasing labor costs; and lower interest rates on money borrowed. The report is available online at www.eia.doe.gov.
LONG-DISTANCE REVENUE. The Federal Communications Commission released a staff report, Long Distance Market Shares, which shows that as of the third quarter of 1997, 83 percent of long-distance revenues went to the four largest long distance carriers: AT&T, MCI, Sprint and WorldCom. The report can be downloaded from the FCC-State Link Internet site at www.fcc.gov/ccb/stats.
NUCLEAR WATCH LIST. The Nuclear Regulatory Commission has released its revised watch list of 13 nuclear power plants that warrant increased attention. Illinois Power Co.'s Clinton plant was the only plant added to the list; Maine Yankee Atomic Power Co.'s plant, which is being shut down, was the only plant removed from the list.
NUCLEAR WASTE DISPOSAL. As expected, the Department of Energy did not meet its Jan. 31 deadline to begin storage of high-level nuclear waste, as required by a federal court. Under the Nuclear Waste Policy Act of 1982, a permanent waste repository was to have been completed by 1998. But DOE has said that the likely repository at Yucca Mountain, Nevada, will not be ready until 2015 at the earliest. Electric ratepayers so far have paid about $14 billion into the Nuclear Waste Fund. Because the federal government now has defaulted on the deadline, DOE ultimately could be liable for as much as $56 billion in damages, and as much as $24 billion more for replacement power costs. Senator Frank H. Murkowski blasted DOE's failure to meet the deadline: "It's blatantly hypocritical and intellectually dishonest for the Administration to complain about carbon emissions and global warming while¼ putting our largest source of carbon-free energy at risk."
NITROGEN OXIDE EMISSIONS (em AUCTIONS. ISO New England will conduct the first multi-state auction of nitrogen-oxide emission reduction credits. ISO-NE members will purchase the credits to offset increases in NOx emissions generated last summer. The rise in emissions stemmed from the operation of certain power plants to avoid electricity capacity shortfalls in New England. The credits will apply to the "ozone season," May through September, and can come from anywhere in New England.
NITROGEN-OXIDE EMISSIONS (em EPA REVIEW. Many concerns were raised at a recent hearing over nitrogen-oxide state implementation plans proposed by the Environmental Protection Agency. Mark Gray, manager of Environmental Services for American Electric Power, said Feb. 3, that the EPA disregarded recommendations of the 37-state Ozone Transport Assessment Group. The group had suggested a range of emission reductions (em from 55 percent to 85 percent (em instead of an "onerous one-size-fits-all" approach.
Utilities, labor groups, and other organizations from the regions that the plan would affect have formed the Alliance for Constructive Air Policy, a coalition that will work with policymakers to find methods to reduce ozone pollution. ACAP members are developing an alternative proposal to EPA's proposal.
The EPA's plan, proposed in November 1997, would require uniform NOx emissions reductions of 85 percent by utilities and other large sources in 22 states in the Midwest, Mid-Atlantic, Southeast and Great Lakes regions.
GAS PRODUCER REFUNDS. The FERC on Jan. 28 again ruled that natural gas producers must refund to customers approximately $500 million for gas produced in Kansas and sold interstate at rates that included Kansas ad valorem or property taxes. In denying rehearing, the FERC noted that such taxes are not eligible for inclusion in rates under the Natural Gas Policy Act of 1978. Last fall the FERC had ruled that a court ruling left it no choice but to order the refunds. Amoco Production Co., Anadarko Petroleum Corp., Mobil Oil Corp., OXY USA Inc., and Union Pacific Resources must refund the money by mid-March, which the companies claim will produce financial hardship. Legislation introduced in both the U.S. Senate and House of Representatives would require the producers to pay only the principle owed (em not the interest, which makes up nearly 80 percent of the $500 million. Docket Nos. rp97-369-001 et al., Jan. 28, 1998 (F.E.R.C.).
PIPELINE RATEMAKING. While it has issued a certificate to Transcontinental Gas Pipe Line Corp. for construction and operation of its Mobile Bay, Ala., offshore lateral, the FERC nevertheless has denied rehearing of a prior order that approved rolled-in rates instead of incremental pricing. Docket Nos. cp97-92-000, et al., Jan. 28, 1998 (F.E.R.C.).
Transco had argued that it qualified for a presumption of rolled-in rate treatment under the commission's statement of policy on pipeline pricing. See, 71 FERC ¶ 61,241 (1995), order on reh'g., 75 FERC ¶ 61,105 (1996).
STRANDED COSTS. The New Mexico Supreme Court examined whether state law gives the city of Las Cruces authority to condemn facilities owned by El Paso Electric Co. This issue had been certified to the state Supreme Court by Judge Leslie Smith of the U.S. District Court and the issue has been returned to Judge Smith's court for a final determination. City of Las Cruces v. El Paso Electric Co. et al., No. 23,846, Feb. 10, 1998 (N.M.)
Meanwhile, the Federal Energy Regulatory Commission on Feb. 12 held a hearing to determine how much, if any, stranded costs the city would owe El Paso Electric if it takes over the electric system. Docket No. sc-97-2-000 (F.E.R.C.).
PURCHASED POWER CONTRACTS. The owners of two waste-to-energy generating plants filed a $1.8-billion lawsuit in Palm Beach County Circuit Court against Florida Power & Light Co., alleging contract violations in a dispute related to Florida's largest municipal bond default. The now-shut-down plants are owned by Okeelanta Power and Osceola Power Ltd. Partnership, which are affiliates of PG&E Corp., Bechtel Enterprises, and Flo-Sun Inc. Florida Power & Light entered a contract to purchase the output, but then argued it had no further obligation to continue the purchases because operating deadlines were not met. The owners counter-sued the utility for the $1.8 billion it contracted to pay over 30 years.
TELECOMMUNICATIONS RETREAT. Texas U.S. District Judge Joe Kendall issued a temporary stay of his Dec. 31 ruling striking down key parts of the Telecommunications Act of 1996, pending an appeal by the Federal Communications Commission and long-distance companies. Kendall had found that the Act inflicted serious financial punishment on Bell System operating companies by keeping them out of the long-
distance business. SBC Communications, Inc. v. FCC, No. CIV.A. 7:97-cv-163-x, Dec. 31, 1997 (N.D.Tex.).
WATER PLANT RATE BASE. A Florida appeals court has struck down a state PSC ruling for arbitrarily changing a rate-base method for a wastewater treatment plant. It faulted the PSC for comparing plant capacity against annual average daily flow in place of using the peak-month average daily flow. Florida Cities Water Co. v. Fla. PSC, No. 96-3812, Jan. 12, 1998 1998 WL 5407 (Fla.App.).
LOCAL TELCO COMPETITION. The North Carolina Utilities Com-
mission has turned down a request by Time Warner Communications of North Carolina to offer competitive local exchange telephone service within the service territory of an established local exchange carrier, ALLTEL Carolina Inc., deciding that ALLTEL did not lose an exemption protecting its franchise territory from competition simply because one of its affiliates, ALLTEL Communications, had received certification as a competitive local carrier. (Under the state's telephone reform law, LEC franchise territories with less than 200,000 access lines are exempt from competition if the incumbent carrier does not compete outside its area or elect price regulation.) Docket No. p-472, Sub 6, Jan 7, 1998 (N.C.U.C.).
LOCAL TELCO RATES. The New Jersey Board of Public Utilities
approved a schedule of rates for local exchange services to be offered by MFS Intelenet of New Jersey Inc., a new entrant in the state's local telephone market. In doing so it ruled that a detailed cost review was not justified because the new carrier has no captive customers, and any customers it might attract can easily obtain local service from Bell Atlantic-New Jersey Inc., the incumbent carrier. The board added that the proposed rates could not be considered unreasonable considering the "competitive posture" of the new carrier, and the "procompetitive policies of both federal and state law." Docket No. tt97010043, Jan. 7, 1998 (N.J.B.P.U.).
NEED FOR POWER. The Alabama Public Service Commis-
sion authorized Alabama Power Co. to build an 800-megawatt, combined-cycle generating unit at its existing Barry Steam Plant facility. The PSC rejected claims by independent power producers that the utility had failed adequately to consider whether retail competition would mitigate its need for power. The commission said that the utility must clearly have additional capacity by 2001 to maintain reliable service and that the form and extent of changes in the state's electric industry structure were not yet certain. It also rejected claims by the IPPs that the company's plan was flawed because the need for power could be satisfied at a lower cost through the construction of combustion turbine units by competitive suppliers. It said that such an analysis failed to consider the need to minimize the "total cost" of generation by balancing the amounts of peaking, intermediate and baseload capacity. Docket No. 26115, Dec. 12, 1997 (Ala.P.S.C.).
TELCO/CABLE CROSS-SUBSIDY. The Michigan Public Service Commission directed Ameritech Michigan, a local exchange carrier, to stop participating in a marketing program with an affiliated cable television company, Ameritech New Media Inc. Other cable providers in the state had complained that Ameritech violated state law by offering checks to prospective customers redeemable for telephone service as an inducement to subscribe to New Media's "Americast" cable service. The PSC ruled that the issuance of the pre-signed, pre-dated "AmeriChecks" by the LEC, while drawn on a New Media Bank account, violated state rules banning provision of regulated service "in combination with an unregulated service." It rejected claims by the LEC that the law did not apply because the promotion involved "different corporate entities" and found that the opportunity for customers to use AmeriChecks as a discount or offset against tariffed rates for regulated services "cemented the ties creating a combination of regulated and unregulated services." Case No. u-11412, Dec. 19, 1997 (Mi.P.S.C.).
ELECTRIC RATE RESTRUCTURING. The Arkansas Public Service
Commission has authorized Entergy Arkansas Inc. to restructure its rates in anticipation of competition, permitting the utility to reduce rates and increase the pace of amortization for its nuclear generating investment. It added that it "expects the utility to¼ actively promote retail electric competition in Arkansas."
The approved rate restructuring plan includes: (1) rate reductions of $155 million in 1998 and $62 million beginning in 1999; (2) rate design moves to eliminate interclass subsidies without rate increases; (3) rate stability until July 1, 2001; (4) ratepayer protection against rate increases associated with loss of wholesale load; and (5) the capture of excess annual earnings and the earmarking of such funds for payment of potential future ratepayer liability for stranded costs. Docket No. 31, Dec. 12, 1997 (Ark.P.S.C.).
CUSTOMER AGGREGATION. Enron Energy Services has filed
a complaint with the state Ohio PUC challenging as "uncompetitive" a proposed long-term aggregation contract for Ohio Edison Co. to supply several McDonald's restaurants with electricity. Ohio Edison is proposing to give McDonald's a discounted electric rate in return for becoming the exclusive supplier for 10 years. Ohio Edison, a subsidiary of FirstEnergy Corp., has filed suit in the Ohio Supreme Court challenging the PUC's aggregation plan.
PUBLIC POLICY PROGRAMS. The New York Public Service Commission on Feb. 2 issued an order establishing policies for the administration of its Systems Benefits Charge, which will be used to promote energy efficiency and public policy programs during the transition to competition. The order designates the New York Energy Research and Development Association as a third-party administrator for SBC funds, which will be collected by the utilities over the next three years. Case 98009/94e0952, Feb. 2, 1998 (N.Y.P.S.C.).
ELECTRIC RESTRUCTURING PLANS. The New York PSC has
approved a five-year modified rate and restructuring plan for New York State Electric and Gas Corp., which allows all customers to choose their supplier of electricity by Aug. 1, 1999, and provides for overall customer savings of $725 million. Chairman John F. O'Mara noted that the plan implements "one of the most aggressive timetables for customer choice." Rates for large industrial customers and high load-factor customers will be reduced by 5 percent annually. Residential and small commercial customer rates will be frozen at present levels for the first four years of the plan, with a 5 percent reduction taking effect in the fifth year. Case 98005/96e0891, Jan. 27, 1998 (N.Y.P.S.C.).
RETAIL CHOICE. Following approval from the New York PSC,
Consolidated Edison Co. of New York Inc. on Feb. 3 revealed details of its retail choice program, to begin June 1 for about 63,000 customers. At that time, 500 megawatts of electricity will become subject to retail competition, with choice phased-in for all customers by year-end 2001. Each customer who chooses a supplier other than ConEdison will receive two bills: one for delivery of the electricity from ConEdison, and the other for the commodity sold by energy service companies. Starting in February, ConEdison bills will contain a "retail choice shopping credit," which will show how much customers can save if they purchase electricity from another supplier. The utility will pay a one-time, $50 incentive to residential and religious rate class customers, and $75 to small nonresidential customers to encourage participation in retail choice programs.
Mergers & Acquisitions
RATEPAYER BENEFITS. The New Jersey Board of Public Utili-
ties approved the merger of Atlantic City Electric Co., and Delmarva Power and Light Co. to form a new company, Conectiv Inc. The board rejected calls for the application of stricter standards when reviewing such cases. Consumer advocates had alleged that the board should switch from a "no harm test" in reviewing merger and reorganization applications to a test that requires a showing of a "positive benefit" to ratepayers. The board said that it had used the stricter test in only two cases in recent history, and that one involved a hostile takeover bid. It went on to find that the merger would save ratepayers $15.75 million annually and that voluntary labor force reductions would limit the effects of merger-related layoffs. Docket No. em97020103, Jan. 7, 1998 (N.J.B.P.U.).
CANADIAN GAS SERVICES. The boards of directors of Trans-
Canada PipeLines Ltd. and NOVA Corp. on Jan. 26 agreed to merge the companies to create the fourth largest energy services company in North America. The new company will hold $16 billion in revenues and $21 billion in assets. NOVA shareholders will exchange each NOVA share for 0.52 TransCanada shares, and then the new company will be divided into separate energy and chemicals businesses. The companies believe that the merger will allow them to offer low-cost flexible services from the Western Canada Sedimentary Basin to end-users in North American markets.
Restructuring Electric Legislation
New bills are on deck, but many are facing rough sledding.
CONNECTICUT. Legislators had hoped to have a bill ready on
Feb. 4 and go to public hearing within two weeks from that date. The new bill closely resembles last year's failed bill.
INDIANA. SB 431, passed through the Senate Commerce and
Consumer Affairs Committee. But the electric bill is expected either not to make it to the full Senate for a vote, or to have all its key components removed. Because the state's major utilities disagree on restructuring, the legislators want to involve them in discussions to write another restructuring bill that would be considered next year.
NEW MEXICO. The Public Utility Commission sent draft leg-
islation to the legislature proposing to open the state's electric market to retail customer choice beginning Jan. 1, 2001. The PUC also submitted a report to the governor and the Legislature explaining choice from the customers' perspective by using extensive cost and socioeconomic data for all regions of the state. The draft leaves to further commission review the question of stranded cost recovery and functional separation of generation from other utility activities. Under the draft legislation, restructuring must produce stabilized or reduced rates and provide incentives for demand-side management and customer conservation efforts. Case No. 2681, Jan. 28, 1998 (N.M.P.U.C.).
OKLAHOMA. State Sen. Kevin Easley introduced SB 888, which
would have accelerated completion of restructuring studies required by the Electric Restructuring Act of 1997. But the Easley bill is stymied in committee.
SOUTH CAROLINA. The PSC denied a request by an electric pro-
vider, Electric Lite, to restructure the electric industry without legislation. It issued its own proposal for restructuring the state's electric industry, but cautioned that "there may be little to gain and much to lose" from competition. That bill will be pitted against an electric restructuring bill on the table by Rep. Doug Smith, which calls for immediate restructuring of the electric industry. The PSC recommended functional unbundling, a regional ISO and a five-year transition period for full implementation of customer choice. They would examine the need for a power exchange that allows for bilateral contracts. If permitted by the state legislature, utilities would recover "verifiable stranded costs over a reasonable period."
VIRGINIA. Two disparate electric restructuring bills are up for
consideration, one largely authored by Virginia Power. The latter does not commit to a date certain for retail choice, and the former, introduced by state Sen. Jackson Reasor Jr., would phase-in retail competition through 2004. But while Virginia Power wants its bill considered this legislative session, which ended March 14, Reasor prefers both bills be carried over to the 1999 legislative session.
WASHINGTON. State Sen. Lisa Brown introduced SB 6560, the Electric Consumers Protection Act, would require extensive rate disclosure and enact dispute resolution procedures. Also, when marketing power, utilities would have to identify the types of resources used to generate power, and the amount of air emissions produced. But it appears that SB 6560 likely will be killed in the House, in favor of a bill only requiring utilities to unbundle their costs of service on electric bills.
LOU L. PAI, Chairman and CEO of Enron Energy Services said
Enron plans to make "PECO-type" offers to other investor-owned utilities in the future. He promised that these offers would be made on a "more friendly basis," however. (Enron had asked the Pennsylvania PUC to allow it to become the provider of last resort to PECO's customers.) Pai predicted that Pennsylvania could become an energy hub because well-written legislation will attract businesses. The company announced plans to make major investments in the state. On the other hand, Pai pronounced that the California Independent System Operator and Power Exchange system "doesn't work¼ We see a humor in this."
CNG Energy Services Corp. and Cendant Corp. have agreed to jointly make available CompleteHome to CNG customers. The companies will offer CompleteHome service, one of Cendant's energy advantage programs, to more than 1.5 million CNG customers. The CompleteHome membership program offers discounts of 10 to 50 percent on the purchase of more than 100,000 name-brand home products from manufacturers such as GE, Black & Decker, Sony and Maytag and home service companies such as True Value, Merry Maids, Chem Dry, Terminix and TruGreen-Chemlawn.
CellNet Data Systems Inc. and DukeSolutions, a subsidiary of Duke Energy, announced a contract under which CellNet will provide data communications services to DukeSolutions and Duke Energy Trading and Marketing customers over its new California network. The contract also includes an option to expand service coverage to any additional networks CellNet may build in other states. The agreement with DukeSolutions is Cellnet's fifth agreement with a major ESP to provide data communications services over its new California network.
News digest is compiled by Lori A. Burkhart and Phillip S. Cross, contributing legal editors, and by Beth Lewis, editorial assistant.
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