The spectre of retail competition in electricity presents some difficult but solvable technical problems in creating new markets. It could lead to a new world of regulation. At the least, it will expose some currently protected utilities to potential losses that could prove substantial.
This prospect of losses has inspired some high-cost utilities to mount a formidable defense of the status quo, coupled with an aggressive offense to shape the transition.
U.S. District Judge Prank Polozola has settled 22 lawsuits involving bankrupt Cajun Electric Power Co-op. and Gulf States Utilities over the River Bend nuclear plant. The settlement turns Cajun's 30-percent share of River Bend over to the Rural Utilities Service (RUS), which holds liens on most of Cajun's assets.
The settlement gives RUS three options: 1) seek a buyer for River Bend, 2) take title in its own name, or 3) give Cajun's 30-percent interest to Entergy Gulf States.
Ralph R. Mabey, trustee in the Chapter 11 bankruptcy proceedings of Cajun Electric Power Co-op., has entered into an amended asset-purchase agreement with Louisiana Generating LLC for the purchase of Cajun's nonnuclear assets. Louisiana Generating LLC is the joint-venture affiliate of NRG Energy, Inc. and Zeigler Coal Holding Co.
The NRG/Zeigler bid was selected in April, but on July 15, the bankruptcy court rejected the plan's buyer-protection provisions.
A new law could help New York utilities reduce electric rates
and improve their balance sheets.
Legislation recommended by Gov. Pataki on June 1, 1996, seeks to provide the New York Public Service Commission (PSC) with a new financial tool to address possible stranded costs as the state moves toward a competitive retail electric market.
With six merger and acquisition (M&A) deals announced between May 1995 and January 1996, and three more so far this year, the long-predicted consolidation of the electric utility industry is taking hold. At least 23 utilities, with business-combination transactions pending, are part of the frenetic domestic M&A activity that has swept the industry.
Kenetech Windpower (KW), a subsidiary of Kenetech Corp., on May 29 filed a voluntary petition of reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Northern District of California. Parent corporation Kenetech does not intend to seek bankruptcy relief, nor cause any of its subsidiaries not directly engaged in the windpower business to seek such relief.
Despite two years of debate, little progress has been made toward a solution to the issue of stranded costs. And since the two sides have almost no common ground, any accommodation seems unlikely. Utilities that seek stranded-cost recovery appear to have the upper hand at present, but the stiffest resistance still lies ahead. The Federal Energy Regulatory Commission's Order 888 clearly favors utilities, but customer reaction signals a shift to another venue.
Moody's Investors Service downgraded the long-term credit ratings of Niagara Mohawk Power Corp. (NiMo) on April 25, citing the utility's "limited progress" in achieving the goals set forth in its "PowerChoice" proposal, among other concerns.
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