Will new technologies undermine the customer base?

Or can utilities use them offensively?The electric power industry stands poised to move to a fully competitive market. Business realities already imply a broadening of customer choice.

Two more states at opposite ends of the country have acted substantively on electric utility restructuring (em one moving full speed ahead toward unbundling of wholesale "merchant" services, the other seeking to slow down the transition to retail wheeling.

The Nevada Public Service Commission (PSC) has released draft sections of a report on electric industry restructuring that was scheduled to go to the state legislature in June.

In April, Texas Utilities announced that it would buy ENSERCH, Western Resources launched a hostile takeover bid for Kansas City Power & Light, and The Southern Co. initiated its ultimately futile bid for the United Kingdom's National Power. Eight other pending mergers involving major electric utilities have been announced during the last year. Utility managements clearly believe their future success requires merging with other utilities.

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.

In an article entitled "Rate Unbundling: Are We There Yet?" (PUBLIC UTILITIES FORTNIGHTLY, Feb. 15, 1996, p. 30), authors Susan Stratton Morse, Meg Meal, and Melissa Lavinson urge regulators to unbundle the cost of capital to recognize that the business risk of electric generation exceeds that of transmission and distribution (T&D).

A Moody's report, Legal Disaggregation Threatens Bondholder Security, warns that bondholders (em previously secured by a blanket lien on substantially all of a utility's property (em may find themselves secured solely by generating assets, whose real market value may be less than the outstanding secured debt. Moody's identifies 14 companies that may spin off transmission and distribution (T&D) assets, retaining generating assets because of indenture restrictions.

A Moody's report, Legal Disaggregation Threatens Bondholder Security, warns that bondholders (em previously secured by a blanket lien on substantially all of a utility's property (em may find themselves secured solely by generating assets, whose real market value may be less than the outstanding secured debt. Moody's identifies 14 companies that may spin off transmission and distribution (T&D) assets, retaining generating assets because of indenture restrictions.

John Anderson is jumping out of his shoes. And his socks, too. His group, the Electricity Consumers Resource Council (ELCON, where Anderson serves as executive director) may at last get its way.During a few weeks in October, a good half-dozen energy industry players (em including utilities and regulators (em came out in favor of customer choice for electric and gas service.

Suppose you want to reduce emissions

of carbon dioxide to lessen the chance

of global warming. Should you (a) prohibit coal burning in electric power plants, (b) encourage coal use for power generation, or (c) force electric generators to pay an "externality" surcharge to reflect the cost of CO2 emissions?Here's another one. You are an independent power producer.