Courts
NITROGEN-OXIDE EMISSION LIMITS. Denying an appeal by electric utilities and industry groups against rules proposed by the U.S. Environmental Protection Agency for emission limits for nitrogen oxides at certain electric utility boilers, a federal appeals court has ruled that EPA properly interpreted the Clean Air Act. The act allows EPA to set NOx limits for certain electric utility boilers if it could show that more effective technology for low-NOx burners was available, the court said. It said the EPA acted reasonably in relying on linear regression models and a dollars-per-ton cost-benefit method in estimating emissions, mitigation and benefits. However, it vacated and remanded the EPA's decision to reclassify retrofitted cell burner boilers as wall-fired boilers. Appalachian Power Co. v. EPA, Nos. 96-1497, Feb. 13, 1998, 1998 wl 56312 (D.C.Cir.).
ANTITRUST ISSUES. A U.S. District Court has postponed a review of allegations that a small local exchange telephone carrier, Camden Telephone, had violated federal antitrust laws by failing to provide subscriber listings to a competitive directory publishing company, Direct Media Corp., at a reasonable price. (The publisher's other option would be to copy the LEC's white page directory.) The court ruled that the Telecommunications Act of 1996 requires LECs to provide directory listings at a reasonable price and that the Federal Communications Commission has primary jurisdiction to resolve the issue. Direct Media Corp. v. Camden Tel. & Tel. Co., Inc., No. cv296-108, Dec. 2, 1997 (S.D.Georgia).
YELLOW PAGES REVENUE. The Washington Supreme Court upheld a decision by state regulators to impute Yellow Pages Revenues earned by a publishing affiliate US West Direct when setting base local telephone rates for US West Communications Inc., explaining that the affiliate derived substantial benefits from its relationship with the parent company. It also upheld other findings that had led to rate reductions for the carrier. (In 1996 state regulators had told the carrier to trim rates by $91.5 million, citing service quality problems.) U S West Communications, Inc. v. Wash. UTC, Dec. 24, 1997, 949 P.2d 1337 (Wash.).
WATER UTILITY METERS. Endorsing automated meter reading, the Rhode Island Supreme Court overturned a 1996 state PUC order that had rejected a wireless AMR installation by the city of Providence as too costly, but OK'd upgrades to older electronic meter interface units (also known as ARB), already in place for a third of the utility's 68,000 retail accounts. Said the court: "Given the benefits of AMR over ARB, a one-time $78 charge per account arguably would prove more cost-effective." Providence Water Supply Bd. v. R.I. PUC, No. 96-600-m.p., March 11, 1998, 1998 wl 122623 (R.I.).
Federal Agencies
COAL/UTILITY CROSS-OWNERSHIP. The Federal Trade Commission has requested
comments by April 27 on a proposed agreement with PacifiCorp to address charges that a planned acquisition would lead to increases in U.S. electricity prices. The acquisition in question, which was not yet final as of Feb. 18, would have PacifiCorp bidding $10.7 billion for The Energy Group, PLC, a U.K. company that owns Peabody Coal in the U.S., which in turn owns two mines (Kayenta and Black Mesa) that offer the sole source of coal for the Navaho and Mohave power plants, which compete against PacifiCorp generation. The FTC noted that such control could give a merged PacifiCorp/Peabody both "the incentive and the ability" to raise coal supply prices to competing generators. The proposed consent agreement calls for PacifiCorp to divest the two coal mines and to build a "firewall" forbidding Peabody from disclosing to PacifiCorp any nonpublic information about some of its coal-buying customers. File No. 971-0091, Feb. 18, 1998; 63 Fed.Reg. 9551 (Feb. 25, 1998).
NUCLEAR WASTE DISPOSAL. Forty-one nuclear-owning electric utilities have asked the U.S. Court of Appeals to order the U.S. Department of Energy to develop a program immediately to begin disposing of nuclear waste. The utilities asked the court to enforce its Nov. 14, 1997 order stating that DOE has an unconditional obligation to dispose of the utilities' spent nuclear fuel by Jan. 31, 1998. The utilities seek relief from further contributions into the Nuclear Waste Fund and ask the court to bar the federal government from terminating contracts for waste disposal.
Business Wire
THE U.S. DEPARTMENT OF ENERGY has awarded ERI Services, a subsidiary of Equitable Resources Inc., a contract valued at $150 million for energy savings performance contracting services. ERI Services will install energy-saving technologies and equipment in federal buildings with no up-front costs to the government. For a set number of years, ERI Services will receive a percentage of the energy savings from the installations.
Minnesota Power intends to file with the Minnesota Public Utilities Commission the organization of its new telecommunications subsidiary, MP Telecom. Initially MP Telecom will provide additional high-speed and large-capacity communications largely in wholesale markets.
CellNet Data Systems Inc. will provide informational metering data services to 71 Circuit City sites including retail stores and distribution and service centers. CellNet will provide service on a monthly per-meter basis and will deliver hourly intervals of electricity consumption data daily over CellNet's Web site, www.myEnergyInfo.com.
Dick Hahn, vice president of technology at Boston Edison, said electric ratepayers will benefit from its joint venture with Residential Communications Network, because it built a new fiberoptic network for its electric business at no additional cost to ratepayers (em a $3-million savings. Hahn was responding to an investigation by the Massachusetts Department of Telecommunications and Energy into whether the utility improperly subsidized a cable television and telecommunications venture through unregulated subsidiary The Boston Energy Technology Group.
Congress
ELECTRICITY CAUCUS ROLE. U.S. Rep. Tom Bliley (R-Va.), Commerce Committee chairman of the House of Representatives, on March 2 wrote to Rep. Bill Thomas (R-Calif.), chairman of the House Oversight Committee, seeking official acknowledgment of the Congressional Electricity Caucus as a congressional membership organization. The group was formed to bring competition to America's electric markets by a date certain. Bliley would serve as co-chair along with Reps. Joe Kennedy (D-Mass.) and Charles "Chip" Pickering Jr. (R-Mas). It plans to educate Congress on public policy questions raised by increasing competition among electric suppliers, but will not advocate any one legislative proposal over another.
Studies & Reports
UK ELECTRIC INDUSTRY. Standard & Poor's Ratings Service recently released U.K. Electrics: Another Year of Change, which predicts that in 1998 the U.K.'s electric sector will experience the same growth in activity seen in 1997 as power companies grapple with competitive and regulatory shifts affecting pricing and generation. Acquisitions of distribution companies dominated 1997, as all but one of the original 12 regional companies in England and Wales were acquired by the end of the first quarter. In 1998, S&P foresees consolidation in the supply sector.
U.S. POWER DEMAND. Margins Under Fire: Wholesale Power Price Forecast for Western US Markets, 1997-2011, a report by Resource Strategies, finds that West Coast utilities have underestimated their future power needs, and will need about 25 more generating plants than currently planned. The study also said the Bonneville Power Administration and the Northwest Power Area, long the dominant supplier in the WSCC area, may already have lost their leadership status.
INCENTIVE REGULATION. The Committee on Energy Resources and the Environment, at the National Association of Regulatory Utility Commissioners, has released a report, Performance-Based Ratemaking in a Restructured Electric Industry. The report looks at existing PBR programs and reviews how state regulators have set up different forms of PBR for vertically integrated utilities. The report suggests ways to use PBR in a competitive electric industry. Also, the report provides insights for those wanting to retain a more traditional industry structure. Copies may be ordered from NARUC, P.O. Box 684, Washington, D.C., 20044.
POWER MARKET DATA. The Business Communications Company Inc. recently published a study, The Changing Electric and Gas Utility Business (No. re-087), which details sales and revenue data in power markets and predicts that by 2002, sales tracking systems will record sales and revenues by function, rather than by utility type. More information is available through BCC's Web page at www.buscom.com/editors.
FERC
GENERATION PLANT DIVESTITURE. The FERC approved the sale of electric generating facilities by two subsidiaries of the New England Electric System to USGen New England, finding no adverse effect on relevant markets. It approved market-based sales rates for the divestiture. The NEES subsidiaries, New England Power Co. and Narragansett Electric Co., are involved in restructuring for retail competition in Massachusetts and Rhode Island.
The sale includes almost all nonnuclear generating assets owned by NEES: (1) 4,000 MW of fossil-fired and hydroelectric generating capacity owned by NEPCO; (2) Narragansett's 10-percent interest in the Manchester Street generation station; and (3) Narragansett's 20-percent interest in the Ocean State IPP. Docket Nos. ec98-1-000, er98-6-000, Feb. 25, 1998, 82 FERC ¶ 61,179.
QF CERTIFICATION. In a case involving qualifying cogenera-
tion facilities, the FERC announced that it will not revoke QF status for any facility that sold power in excess of "net output" under a contract entered into on or before June 25, 1991 (em the date of the commission's Turners Falls decision (55 FERC ¶ 61,487), which first set the rule that QF sales exceeding net output will violate the QF ownership test for certification.
In Turners Falls, the FERC explained that if a QF acquires auxiliary power from a utility to meet its internal needs to allow it to sell more than net output (defined as QF plant capacity minus power to run the station), the FERC will treat the QF as having purchased and resold the auxiliary power from the utility, thus violating the condition that a QF must be engaged primarily in selling power from qualifying facilities.
Acknowledging ambiguities in its regulations (em the "simultaneous buy-sell" rule, at 18 CFR sec. 292.303(a)-(b), appeared to conflict with the Turners Falls rule (em the FERC agreed to exempt contracts signed earlier. But it reaffirmed that other sales exceeding net output (e.g., sales of "gross output") would violate QF certification rules. Docket Nos. el94-10-000, Feb. 25, 1998.
Generating Plants
NEW YORK CITY SALE. Consolidated Edison Co. of New York Inc. on March 3 announced divestiture plans for about two-thirds of its electric generating plants in New York City. The plan divides ConEd's 5,500 MW of electric plants into three bundles. Each bundle contains a major generating plant (em Ravenswood in Long Island City, Astoria in Astoria, and Arthur Kill on Staten Island (em and gas turbine generating facilities in Queens and Brooklyn. ConEd plans to sell two bundles (two-thirds of its total New York City electric capacity) at auction this summer. It hopes to obtain New York PSC approval by July 1, 1998, with the auction process beginning later that month, and winners announced in January 1999. At press time, ConEd had not yet decided which two bundles would be auctioned.
Cooperatives
G&TS CONSIDER MERGER. Two Minnesota generation and transmission cooperatives are studying combining their staffs in anticipation of industry changes. Cooperative Power and United Power Association, the state's two largest G&Ts, feed distribution systems serving 500,000 homes. The boards of the two organizations signed a letter of intent to form a new, as yet unnamed, operating company. Both organizations believe a single operating company "would provide economic benefits and strategic advantages which would be greater than what either organization could accomplish on its own," according to a statement. Both boards indicated their intent is to form an operating company by the end of the year. Both CP and UPA would remain legal entities under the proposal, but would contract with the new operating company for management services. A merger was considered, then deferred for further study because of differences in the tax structure between the two groups. UPA has 400 employees; CP has 360. The G&Ts serve 29 member companies.
CONSUMER ATTITUDES. A survey commissioned by the National Rural Electric Cooperative Association and described by CEO Glenn English in a recent speech to association members claims that 80 percent of electricity customers served by investor-owned utilities would rather take service from a consumer-owned utility and, of that group, more than a third (39 percent) would be willing to pay a little extra each month for the privilege. The survey, proprietary to NRECA members, claims that 62 percent of IOU customers would prefer a utility that is locally owned and controlled.
State PUCs
ELECTRIC RATE CASES. Green Mountain Power Corp. said it
will appeal a 270-page rate decision issued by the Vermont Public Service Board granting only $5.48 million of a requested $22 million revenue increase. That award amounts to 3.6 percent on base rates, compared with the utility's original request of 16.7 percent. The board disallowed $5.48 million in power purchase costs under a contract with Hydro-Quebec, by which GMP and 13 other utilities buy power. Christopher L. Dutton, GMP president and CEO, said the ruling "may be devastating." Docket 5983, March 2, 1998 (Vt.P.S.B.) Download at www.state.vt.us/psb/5983gmp.htm.
Moody's Investors Service said it had "increased concerns" over the utility's ability to sustain its present debt rating level (Sr.Sec., Baa2) due to the "negative" rate order.
RATE BASE EXCLUSION. The Connecticut Department of Public Utility Control has ordered Connecticut Light and Power Co. to reduce rates by $141 million to reflect the removal from rate base of the company's Millstone Unit 1 nuclear power plant and other adjustments for imprudent expenses, advertising and amortization payments. The order cuts rates by $110.5 million, through a non-cash write down of deferred taxes and conservation and load management expenses, and offers a $30.5 million "line-item credit" on customer bills for the lost rate base investment. Docket No. 98-01-02, Feb. 25, 1998 (Conn.D.P.U.C.).
(Millstone Unit 1, down for an unscheduled outage, was ruled "not used or useful" late last year. See, Docket No. 97-05-12, Dec. 31, 1997. Units 2 and 3 were to return to service on April 1 and June 1.)
INDEPENDENT SYSTEM OPERATORS. The Wisconsin Public Ser-
vice Commission has denied a proposal by Wisconsin Power and Light Co. to implement its version of an independent system operator, filed by the company as a condition to its planned merger with two Iowa utilities to create Interstate Energy Corp. The PSC instead has directed the utility to file the ISO proposal crafted by Wisconsin Public Power Inc., which the FERC had approved previously. The PSC said that the ISO, as proposed by WPL, would leave too much control of the power lines in the hands of the companies that own the lines. According to the PSC, that could lead to higher electric prices and a less reliable system, which the PSC's ISO standards were designed to prevent. Case No. 6680-um-100, Feb. 24, 1998.
Mike Stuart, General Counsel for WPPI, reported at press time that WPL had declined to file the WPPI ISO plan with the PSC by March 12, as required, and instead had asked the PSC for reconsideration of its order, and had also asked the FERC for an extension of time to file its ISO plan.
NIAGARA MOHAWK RESTRUCTURING. The New York PSC approved a revised restructuring plan (PowerChoice) for Niagara Mohawk Power Corp. that will allow all customers to choose their energy supplier by 1999 and will save about $2 billion over the next five years. The ruling marks the last approval of a restructuring plan for an investor-owned utility in New York and will cut rates for (1) residential and small commercial and (2) industrial and large commercial customers by 3.2 percent and 25 percent, respectively, during the first three years of implementation. The company has agreed to absorb almost $2 billion in stranded costs on generation investment and purchased power contracts. The order also approved the utility's Master Restructuring Agreement, which will terminate, restructure or amend 29 purchased power contracts with 16 independent power producers. Case 94-e-0098, Feb. 24, 1997 (N.Y.P.S.C.).
WATER UTILITY RETURNS. The Connecticut Department of Public Utility Control ruled that ongoing sales of surplus watershed property by Birmingham Utilities Inc. would reduce perception of financial risk among investors despite the company's relatively small size. It authorized Birmingham Utilities Inc. to increase water rates by 4.1 percent and adopted a rate of return of 12.16 percent. It noted the company's decision to reduce its dividend by 20 percent during 1997 showed that its board of directors was optimistic about the company's financial outlook. Docket No. 97-07-14, Jan. 21, 1998 (Conn.D.P.U.C.).
PILOT PROGRAMS (em IOWA. The Iowa Utilities Board has set guidelines for MidAmerican Energy Co. to develop a two-year pilot program to extend energy choice to at least 3 percent of both residential and small commercial electric customers. The utility must design an unbundled rate tariff for each group based on current bundled rates and allocated costs and must provide backup service (em either directly or through suppliers. MidAmerican will retain control of meters and may recover start-up and administrative costs from all of its customers, but must defer estimated lost revenues until the board reviews the issue at the conclusion of the pilot. MidAmerican, which has no power marketing affiliate, may participate as a supplier through a functionally separate corporate unit. Docket No. noi-95-1, Feb. 10, 1998 (Iowa U.B.).
PILOT PROGRAMS (em IDAHO. The Idaho Public Utilities Com-
mission has authorized Washington Water Power Co. to set up a new pilot program that will allow some of its residential and small commercial customers an opportunity to choose from a portfolio of energy services, beyond traditional bundled rates, but without changing energy providers. Despite claims by its staff that the company would be the primary beneficiary of the program, the PUC ruled that experience gained from operation of the pilot would benefit all customers. Case No. wwp-e-97-11, Order No. 27351, Feb. 6, 1998 (Idaho P.U.C.).
WHOLESALE POWER SUPPLY COSTS. The New Jersey Board
of Public Utilities set aside a petition brought by a member of the state legislature seeking lower electric rates for his constituents based on claims that the local utility, Rockland Electric Co., should be made to cancel existing power sales agreements and sell wholesale power from its parent company, Orange and Rockland Utilities, Inc., or through competitive bidding. The BPU said the complaint, while "well intentioned," was premature in light of its ongoing investigation into restructuring the state's electric industry. Docket No. er97010045, Jan. 23, 1998 (N.J.B.P.U.).
EARNINGS SHARING PLAN. The New York Public Service Commission has adjusted an earnings sharing agreement for Brooklyn Union Gas Co. (reducing the cap on equity returns, above which ratepayers would share) in its order approving the company's merger with Long Island Lighting Co. Under a settlement agreement, the merger will take place through a new parent holding company whose subsidiaries would include Brooklyn Union's corporate parent, KeySpan Energy Corp., and Long Island Lighting. The commission found that the agreement would enable both companies to "adapt to the emergence of competition" and will decrease consumers' electric bills. Case 97-m-0567, Feb. 5, 1998 (N.Y.P.S.C.).
STANDARD OFFER SERVICE. The Maine Public Utilities Commission has adopted rules for "standard offer service" for all customers when the state's electric market opens, under state law, beginning March 1, 2000. The SOS will resemble traditional bundled utility service, with a single bill for all service components and regulation of terms and conditions. The winner of a commission-sponsored competitive bidding process will provide the power to the standard offer group for each utility franchise area. The PUC said the SOS process should allow for a "smooth transition to a competitive environment." Docket No. 97-739, Feb. 11, 1998 (Me.P.U.C.).
APPLIANCE REPAIR. The New Jersey Board of Public Utilities
has upheld rates proposed by Public Service Electric and Gas Co. for competitive gas and electric appliance repair services, finding no cross-subsidy from ratepayers receiving regulated services, but has allowed the utility to update terms and conditions of service to address complaints by the Coalition for Fair Competition, a trade organization representing heating, cooling and appliance service contractors. Docket No. ec96070517, Jan. 23, 1998 (N.J.B.P.U.).
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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