[BETA] Fortnightly

Auctioning gas imbalances offers advantages over bidding on available pipeline capacity.

In a Notice of Proposed Rulemaking issued last summer, the Federal Energy Regulatory Commission proposed a series of auctions for all unutilized short-term rights in pipeline capacity, with the most frequent auction being for transmission rights for the next day. All transporters and the pipeline would be required to release available short-term capacity rights to be auctioned. (See FERC Docket RM98-10-000, Regulation of Short-term Nat. Gas Transp.

Shaky merger policy finds the FERC at war with itself.

"IN HIS DELIGHTFUL ARTICLE, "THE FOLKLORE OF Deregulation," published this summer in the Yale Journal on Regulation, federal judge Richard Cudahy notes the ethereal nature of "virtual electricity." This new product, he explains,"exists only as a blip on a computer screen and will never give one a shock." "Reality," he notes, has "retreated to the money part of the system."

We could use a dose of that reality in looking at electric utility mergers.

State PUCs

Electric Retail Choice. The Arkansas Public Service Commission has issued its final report on electric restructuring, citing a "broad" consensus favoring competition. It predicts immediate benefits for industrial customers, but warns that residential users likely will not see any quick rate cut. The PSC saw competition as consistent with action in neighboring states:

• Oklahoma. State law mandates retail choice by July 1, 2002.

• Mississippi. PSC plan would phase-in competition from 2001 to 2004.

• Missouri.

FERC

GAS PIPELINES. Noting a move toward shorter-term contracts since Order 636, the FERC on July 29 issued an "integrated package" of reform proposals for the natural gas pipeline industry: (1) specific measures in a notice of proposed rulemaking on short-term transportation (transactions shorter than one year); plus (2) an open-ended request for comments in a broader notice of inquiry. RM98-10-000, 84 FERC ¶61,985 [NOPR]; RM98- 12-000, 84FERC ¶61,087 NOI].

Darwin Subart was named assistant vice president, business development, of Williston Basin Interstate Pipeline Co., a subsidiary of MDU Resources Group Inc. Subart has served as the company's business development director since 1994.

Curt L. Meyer joined Peregrine Communications, a fiber-optic network provider, as a regional account manager. Most recently Meyer worked for Strom Engineering.

CMS Energy Corp. elected Kenneth L. Way to its board of directors. Way is chairman and CEO of Lear Corp. Way's election brings membership of the board to 11 directors.

Robert P.

DURING THE WEEK OF June 22 there was a major imbalance between supply and demand for electricity in the Midwest. Although demand was high enough to set a few records, the real problem may have been the lack of supply. Many generators were out of service and a few marketers reneged on contracts to deliver power. Market prices for bulk power allegedly soared as high as $4,000 per megawatt-hour. The industry was left in an uproar over these volatile prices, especially since a competitive market has been touted as a means to achieve lower prices, not higher ones.

FERC

MIDWEST POWER PRICES. Federal Energy Regulatory Commission Chairman James Hoecker announced July 15 that as soon as the staff presents its findings, the FERC will deal with the complaints filed by Cinergy, Steel Dynamics Inc., and others asking for regulatory relief from the late June run-up in Midwest bulk power prices (as high as $7,500 per megawatt-hour), and for a price cap set at $100/MWh. Nevertheless, Hoecker advised that the FERC was in "no hurry," and that the remedies available to it were not entirely clear. Docket No. EL98-53 (Cinergy), filed June 29, 1998; Docket No.

IT TAKES LABOR, FUEL, OPERATING CASH AND INVESTMENT capital to produce and deliver electric power. Which utilities have managed to use these resources optimally to produce and sell kilowatt-hours? How do these utilities compare with each other? Is there room for improvement?

And what about financial success? Does efficiency, as measured by a ratio of inputs to outputs, serve as a reliable predictor of market-to-book ratios or merger premiums?

Some of these questions are answerable; others not.

Courts

ENERGY SUPPORT SERVICES. An Illinois appeals court affirmed a 1997 decision by the state commission that had denied authority to Commonwealth Edison to offer "energy support services," such as design, engineering, construction, analysis and management of electrical power equipment and energy systems. The court made this decision despite the utility's argument that no evidence existed to support the commission's finding that ComEd enjoyed a monopolist's advantage over competitors.

MICHIGAN CHOICE APPEAL. Michigan Attorney General Frank Kelley filed an appeal in the Michigan Court of Appeals of the Michigan PSC's Jan. 14 rehearing order (News Digest, March 15, 1998, p. 18) adopting a phase-in schedule for electric restructuring and retail choice for Consumers Energy and Detroit Edison. Kelley alleged that the order fails to create a competitive generation market or foster lower rates. He called it an "outrage," that gave the utilities everything they wanted. Case Nos. u-11290 et al., Feb. 13, 1998 (Mich.P.S.C.).

NEW HAMPSHIRE RESTRUCTURING. The U.S.