[BETA] Fortnightly

With the Clean Air Act Amendments of 1990 (CAAA) come many complex decisions for electric utilities. By now the majority of utilities have decided how they will comply with the clean air guidelines and acid rain program limits, at least for Phase I. But for those utilities that have selected coal switching as the preferred method of complying with the law, the task gets more complicated. Burn expensive low-sulfur coal and bank or sell allowances? Or burn just enough low-sulfur coal to meet the rules, and no more?

After 40 years of wandering in the wilderness as a minority party, House Republicans are ready to slash and burn what they see as a bloated federal bureaucracy. The next two years will demonstrate just how powerful the legislative branch can be when both House and Senate are controlled by a strong-willed party on a mission. Electric industry officials seem optimistic, but cautious, about this Republican revolution.

A recent rate order by the Pennsylvania Public Utilities Commission (PUC) granting West Penn Power Co. a $53.7-million increase has generated some disagreement between the state's utility commissioners on the issue of rate of return on equity (ROE). Although the PUC reduced the utility's proposed ROE from 12.5 to 11.5 percent, PUC chairman David W. Rolka and vice chairman Joseph Rhodes, Jr. both claimed the ROE was too high.

In his article, "Why Taxes Don't Distort Emissions Trading" (Dec. 1, 1994, p. 37), Michael Thomas suggests that utilities should flow through the proceeds of emission allowance sales to ratepayers in the year of sale. His idea is that utilities can eliminate any net effect on current income taxes by matching the increased revenue (emissions sales proceeds) against a revenue decrease (lower rates charged to customers). Slam dunk. End of story. Unfortunately, it's not so simple.

The Ohio Public Utilities Commission (PUC) has proposed regulations to allow electric utilities to use fuel-cost clauses to recover gains or losses from trading Clean Air Act emission allowances. The PUC emphasized that utilities should use the allowance market to maximize trading while making the use of coal produced in the state part of a least-cost power-supply strategy. Re Amendment of Chapter 4901:1-11 of the Ohio Administrative Code, Case No. 94-1792-EL-ORD, Nov. 23, 1994 (Ohio P.U.C.).

In a separate case, the PUC ruled that Dayton Power & Light Co.

The Environmental Protection Agency (EPA) has approved a plan by 12 northeastern states and the District of Columbia (the Ozone Transport Commission (OTC)) to improve air quality under the Clean Air Act. The plan allows the OTC to establish an alternative-fuel vehicle program fashioned after California's, beginning in model year 1999, or to choose other measures that would provide equivalent pollution reductions. The OTC plan envisions the sale of certain advanced technology vehicles that reduce pollution by more than 70 percent.

(SIDE SUBHEAD)

Each year hundreds of oil or electric customers call Boston Gas to ask about fuel-switching. What do they look for?A gas utility can boost sales only one way-by gaining new customers. And in today's slowly growing economy, conservation trends limit growth opportunities. The average household today uses two-thirds the energy of 15 years ago.

The U.S. Court of Appeals for the District of Columbia Circuit has vacated the Clean Air Act (CAA) compliance rules for reducing NOx emissions from coal-burning electric facilities (Alabama Power Co. v. EPA, No. 94-1170, 94-1329, Nov. 29, 1994). The ruling suspends any obligation to comply with the NOx standards pending further rulemaking by the Environmental Protection Agency (EPA).