[BETA] Fortnightly

Dominion Resources touts its "impacted" method, but opponents call it a "stalking horse" (em a scheme to avoid full review at FERC.

Is the Federal Energy Regulatory Commission prepared to accept true marginal-cost pricing for electric transmission?

With all the criticism leveled at the traditional "contract path," one would think that the FERC would consider a new approach to transmission pricing.

In fact, last year in its final Order No.

More than a decade ago, working at the energy laboratory at the Massachusetts Institute of Technology, the late Fred Schweppe devised a novel scheme for pricing electric transmission. His solution? Do nothing. Simply ignore transmission.

Liberalisation of the electricity markets in the UK and Scandinavia has driven merger activity in these territories. This was evident in 1996 with U.S. companies taking over MEB, East Midlands Electricity and Northern Electric, with London Electricity likely to follow in early 1997.

The Virginia State Corporation Commission (SCC) has directed Virginia Electric and Power Co., a subsidiary of Dominion Resources, Inc., to adopt conflict-of-interest standards to govern board of director membership. The SCC also directed the utility to file an annual independent audit of its affiliate transactions and to cooperate with commission staff in determining whether "Virginia Power is paying for duplicative executive services" from its holding company parent. The action grows out of an SCC investigation into a 1994 public dispute between the utility and Dominion Resources.

Dominion Resources, Inc. (DRI) has asked the Federal Energy Regulatory Commission (FERC) to declare its proposed "impacted megawatt mile (IMM)" tariff a just and reasonable method of pricing transmission service.

The IMM tariff would base electric transmission prices on the actual flows that result from each transmission service, taking account of the size and distance of power flows on all affected lines, the direction of the flows, line loadings, and the costs of relieving any congestion.

Old Dominion Electric Co-op. (ODEC) has entered into a leaseback financing transaction with First Union National Bank that could save its 12 member systems about $4 million per year. First Union leased Unit One of the Clover Power Station from ODEC for 22 years with an upfront cash payment of $47.5 million, then leased it back to ODEC.

Ann R. Chamberlain will manage rates and regulations, and plan and procure gas supplies in her new v.p. position with Virginia Natural Gas, Inc. She steps up from assistant v.p.

Boston Pacific Co., Inc. has added John T. Chang to the company's international power project development practice. He comes from Iroquois Gas Transmission System. Jonathan d'E. Coony was promoted to consultant and will continue work on financial evaluation of power projects in Indonesia, Pakistan, and other countries.

In thinking about transmission pricing for a competitive electric industry, we should remember that the fundamental objective of competition is to increase economic efficiency. Improved economic efficiency, after all, leads to better use of resources, lower costs, and long-term benefits for consumers.

The Virginia Corporation Commission has approved an $8.3-million repayment by Virginia Power (VP) for excessive fuel costs resulting from a 1991 coal-hauling contract with CSX Transportation Inc. The contract became the focus of attention during a dispute last year between the utility and its corporate parent, Dominion Resources, Inc. (DRI).

Commission staff found in a January report that DRI chairman and CEO Thomas E. Capps had pressured VP into the contract, which was expected to benefit the company.

On a purely intellectual level, it is difficult to justify the Public Utility Holding Company Act of 1935 (PUHCA). Sixty years after passage, PUHCA has become an anachronism (em a fact well articulated in comments filed in response to the Concept Release on the modernization of the Act issued last November by the Securities and Exchange Commission (SEC).1 More recently, the SEC's Division of Investment Management actually recommended a conditional repeal (see sidebar).