The New York Public Service Commission (PSC) has issued a framework of goals and strategies for restructuring the electric industry in the state. The PSC directs all electric utilities in the state that have not yet initiated restructuring to file plans that will open the retail generation and energy-service markets to competition for all customer classes.
Market Structure (em PoolCo Model. The PSC adopted a "flexible retail PoolCo" model to ensure an orderly transition to retail competition.
To prepare a report on stranded investment mandated by the Texas legislature, the Texas Public Utilities Commission (PUC) has asked electric utilities to file the required financial information using a new model.
The model consists of six scenarios that use a number of variables approved by the PUC to yield a broad estimate of excess cost over market (ECOM) (em a measure of potential stranded costs. Each utility will file 54 "snapshots" of its potential excess-cost factors based on various competitive market scenarios and market-price assumptions.
With competition looming, electric utilities increasingly resort to price discounts, both to retain customers and to alleviate some of the pressure to introduce retail competition. Performance-based ratemaking (PBR), which allows utilities greater flexibility in offering price discounts, is emerging as an integral component of many restructuring proposals.
However, flexible pricing can create inequity among ratepayers.
Dwindling economic competitiveness has plagued the nuclear power industry for
some years. In the industry's early years, some reactors were completed for less than $100 million. Experience gained overseas (often in projects with American partners) provides sobering evidence that nuclear reactors can still be built at low cost in short periods of time.
The Florida Supreme Court has upheld a decision by the state commission (PSC) to test the cost-effectiveness of demand-side management (DSM) programs for the state's four largest investor-owned electric utilities by measuring the impact of the programs on rates for all consumers, whether or not they participate in DSM programs.
It held the Rate Impact Measure (RIM) test consistent with state law directives to avoid discrimination between rate classes for DSM initiatives (em more so than the Total Resource Cost (TRC) test used alone.
So the Federal Energy Regulatory Commission (FERC) won't break up the electric utility industry. But it may happen anyway (em if not at the FERC's direction, then perhaps under pressure from state regulators who, some say, are threatening to link stranded-cost recovery to vertical disaggregation.
What would a breakup mean for bonds and bondholders?
As we reported last month ("New Corporate Structures Place Bondholders at Risk," May 1, 1996, p.
Since the federal Court of Appeals decision in the Calvert Cliffs case over 25 years ago, no power plant may be built without a thorough socioeconomic impact statement. Yet, schemes to alter the entire supply system of a state - or even the nation - are currently proposed with only cursory attention to socioeconomic consequences.
If approved as proposed, the new accounting standard
for closure or removal of long-lived assets
will bring costs out into the open.
But is it rational?
On February 7, 1996, the Financial Accounting Standards Board (FASB) issued for comment an "Exposure Draft" of a new proposed statement of financial accounting standards pertaining to nuclear plant decommissioning and other similar legal obligations,
Public Utilities Reports 11410 Isaac Newton Sq., Suite 220, Reston, VA 20190 Voice: (703) 847-7720 | Toll Free: (800) 368-5001 FAX: (703) 847-0683
Dear Reader: Welcome to our new website! We’ve spent the past several months rebuilding Fortnightly.com from the ground up, and we’re now in the process of putting it through its paces. We’ll announce our Grand Opening shortly, but in the meantime we hope you’ll excuse our mess, while we bring Public Utilities Fortnightly magazine to an all-new online platform. Your feedback is welcome!