NERC Assessments are Fine, but DOE Task Force Gets Last Word
Go figure. Plans to shut down nuclear generation in Ontario should not affect electricity supplies this winter within the United States, despite early rumors of chaos and rising natural gas prices. However, an unexpected slowdown in coal delivery by some U.S. railroads has "seriously reduced" on-site stockpiles of coal at some generating plants in three regional reliability councils - ERCOT, SERC and SPP - particularly those dependent on coal from the Powder River Basin in Wyoming.
Eric Hirst, and Brendan Kirby
AS U.S. ELECTRICITY MARKETS BECOME increasingly competitive, large industrial customers will discover many new choices. These choices include the opportunity to modify the amount and timing of electricity use in response to prices that vary from hour to hour. In addition, customers can sell certain electricity services, including operating reserves and load following, to the system operator. And industrial customers with cogeneration facilities can participate fully in bulk power markets, buying and selling energy and ancillary services in response to changes in spot prices.
Joseph F. Schuler, Jr.
Key points from approved and pending legislation
A.B. 1890, signed into law Sept. 23, 1996.
• Plant Divestiture. To ensure the safe, reliable operation when utilities sell off generating facilities, buyers or successor corporations must keep the current staff on board for at least two years.
• Stranded Cost Recovery. Statute recognizes explicitly that transition to customer choice can produce employee hardships.
Lori A. Burkhart, and Phillip S. Cross
Putting aside calls for a faster-paced switch to the new industry format, the Michigan Public Service Commission has adopted a phase-in schedule for customer direct access to alternative electricity suppliers that runs through 2002. The order, which some have said needs additional work, also outlines stranded cost recovery policies and related securitization strategies.
Under the plan, 2.5 percent of each electric utility's retail load will become eligible for customer choice each year from 1997 through 2001, with all customers eligible in 2002.
Phillip S. Cross
The New Jersey Board of Public Utilities has approved a settlement plan authorizing Jersey Central Power and Light Co. to recover up to $149 million in purchased power contract buyout costs.
Ronald Rudkin, and David Sibley
By unbundling usage from access, utilities can maximize contribution to margin and yet still retain load.
With deregulation and industry restructuring, energy utilities face price competition from marketers, brokers, independent producers and even other utilities. To succeed in this environment, utilities will need to develop innovative pricing strategies that better meet customer needs and respond more effectively to competition. The common response by utilities to competition calls for price discounting to retain "at risk"
customers by meeting the competition head-on.
Bruce W. Radford
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.
Steven isser, and Robert Michaels
Ask this question: Are Investors today earning what they thought they would, back when they last had faith in regulation?
As their customers discover more competitive prices, many utilities remain saddled with the costs of uneconomic plant and power purchase contracts approved under regulation. They seek compensation for these costs, but the amount deserves a close examination.
Some utilities seek remuneration that exceeds the market value of their common stock. Such a settlement seems overly generous for investors, who will continue to own their shares after the payoff.
Glenn D. Meyers, Buckner Wallingford II, and Horace J. DePodwin
And why policy on
stranded costs defies
a traditional legal or
There are sound economic reasons why policymakers should allow electric utilities to recover stranded costs through a competitively neutral network access charge, or some similar fee. First, differences in the quality of utility management appear to have contributed little to differences in electricity rates among states.
S&Ls won damages when the feds reneged on promises. Utilities could do the same.
It's tough to be a utility CFO these days. For decades, electric utilities have served both as target and conscripted agent of government policy. Utilities pay disproportionately high taxes. Utility rate structures further distort market forces with subsidies flowing from business to residential. These policies actually defeat market forces. To large measure, many of these market failures arise from reconciling the hangover from uneconomic policy initiatives.