Calendar of Events

Oct 27, 2014 to Oct 31, 2014 | Clearwater Beach, FL
Nov 05, 2014 to Nov 06, 2014 | Las Vegas, Nevada
Nov 10, 2014 to Nov 12, 2014 | Toronto, Canada

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Public Utilities Reports

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Utah Approves Sharing of Capacity-release Revenues

Phillip S. Cross

The Utah Public Service Commission (PSC) has authorized Mountain Fuel Supply Co., an LDC, to increase rates by $3.7 million. The LDC will collect the revenue deficiency by assessing a fee of $12.00 per month for 12 months on new residential premises. The charge is designed to recover increased capital and operating costs due to new customer growth in the LDC's service territory. The new rule permits the LDC to record 20 percent of the credits as distribution nongas revenues, while passing the remaining 80 percent back to ratepayers through its fuel-cost adjustment clause.

N.J. Requires LDC to Offer Capacity Release

Phillip S. Cross

The New Jersey Board of Public Utilities (BPU) has approved a two-year capacity-release program for Public Service Electric and Gas Co. (PSE&G), a natural gas local distribution company (LDC), as part of an ongoing effort to unbundle gas services. Other LDCs in the state have already incorporated capacity-release programs, but PSE&G argued that it was without surplus year-round pipeline capacity. The LDC said gas marketers should obtain their own capacity at lower rates through either long-term contracts with the pipelines or through capacity release from other parties.

W.Va. Approves LDC Price-cap Plan

Phillip S. Cross

The West Virginia Public Service Commission (PSC) has approved a new incentive regulation plan for Mountaineer Gas Co., a natural gas local distribution company (LDC). The plan creates price caps that are slightly below current rates and assigns the LDC the risks and benefits of any efficiency gains or losses during the three-year plan period. The settlement also calls for a $3-million rate reduction, and forbids the utility to file for a rate increase during the three-year period. Mountaineer fully assumes the risks and benefits of the fluctuating gas market.

States Consider Employee Compensation Costs

Phillip S. Cross

While authorizing Providence Gas Co., a natural gas local distribution company (LDC), to raise its rates by a total of $3.99 million, the Rhode Island Public Utilities Commission (PUC) reduced the LDC's proposed expense allowance for executive incentive compensation by 60 percent, to match the portion of a performance incentive award designed to reward shareholders. The PUC said that 40 percent of the

performance-based awards under the company's executive incentive payment rules were based on criteria related to cost of gas and operations and maintenance expense.

The Superiority of Spot Yields in Estimating Cost of Capital

Steven G. Kihm

Financial experts often depart from standard financial principles and practices in recommending the appropriate rate of return for public utilities. But ratemaking draws from many fields, not just finance; there may be good reasons for some alterations. In other cases, however, analysts are unaware of violating principles. This article discusses the tendency of some analysts to use historic averages of certain financial variables, as opposed to current spot values, in

return-on-equity (ROE) analyses.

Wired or Mired? Electronic Information for the Gas Industry

Sheila S. Hollis, and Andrew S. Katz

Management expert Peter F. Drucker has observed that our society has entered a "post-capitalist" stage in which economic activity is organized around information: "The basic economic resource ... is no longer 'capital' nor 'natural resources'...

LDCs Test Supply-cost Incentive Mechanisms

Phillip S. Cross

The New York Public Service Commission (PSC) has approved its first market-indexed incentive mechanism to encourage a local distribution company (LDC) to control gas-supply costs. Brooklyn Union Gas Co.'s modified proposal for a one-year pilot incentive mechanism employs an external index as a gas-cost target (the monthly closing natural gas contract price on the New York Mercantile Exchange), rather than a series of internal cost measures based on estimated fixed and variable costs.

FERC Approves Market-Based Gas Storage Rates

Lori A. Burkhart

Finding that Enron Storage Co. lacks market power, the Federal Energy Regulatory Commission (FERC) has approved its request for market-based storage rates for firm and interruptible natural gas service under section 311 of the Natural Gas Policy Act of 1978, subject to conditions (Docket No. PR94-2-000). Enron proposed that rates for individual storage services be determined by the marketplace and agreed to by itself and the customer through arm's-length negotiations.

Innovative Rates: Four Customers, Four Solutions

C. Douglas Bowman

Flexible rate options can remain cost-based, even in a buyer's market, and yet

allow choice between price, reliability, and scheduling.

Customers with a choice are demanding, and getting, lower electric bills. These customers generally include municipals and large industrials. Municipals, as wholesalers, gained access to alternative suppliers via the Energy Policy Act of 1992.

Customer Forum

Every year, Public Utilities Fortnightly holds a forum electric utility executives. And another for gas utility executives. And another for state regulators.

This year we decided to ask utility customers what they think.DuPont, the country's number one chemical company, operates in 70 countries. It is, perhaps, best known for its Teflon products, but it also makes refrigerants, pigments, fibers (Lycra), nylon resins, electronics, medical products, and many other products.

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