IIt’s ironic that in today’s market, as the cost of hedging against commodity price increases has declined, support for utility hedging programs has sunk to a historic low. The ideal time to hedge is when prices are low and markets are relatively calm, because that’s when hedging costs and risks are the lowest. Conversely, waiting until prices rise and markets become volatile will expose customers to higher costs. Convincing regulators to approve hedging programs now will require a collaborative approach to educating and enlisting support from stakeholders.

Test-period and test-year selection continue to generate controversy in rate cases. Examples from Utah provide insight on the difficulties of forecasting and with judging test periods.

Electric utility executives generally view corporate restructuring as a potential source of economic value and a potential partial solution to financial problems that reflect changing business risks. On the other hand, regulatory commissioners attempt to insulate and regulate the utility component of the restructured energy business and to protect the public interest, including reliability of service at reasonable costs.

Commission Watch

PJM/Midwest Market:

Should transmission owners get paid extra for distance and voltage?

While the Midwest now appears set on competitive bidding for the electricity commodity, taking from PJM such tried-and-true elements as locational marginal pricing (LMP), financial transmission rights (FTRs), and a day-ahead market with a security-constrained dispatch, the region remains split over the pricing of transmission.

State PUCs

Electric Retail Choice. The Arkansas Public Service Commission has issued its final report on electric restructuring, citing a "broad" consensus favoring competition. It predicts immediate benefits for industrial customers, but warns that residential users likely will not see any quick rate cut. The PSC saw competition as consistent with action in neighboring states:

• Oklahoma. State law mandates retail choice by July 1, 2002.

• Mississippi. PSC plan would phase-in competition from 2001 to 2004.

• Missouri.

Power Pools & Reliability

SUMMER IN WISCONSIN. Responding to concerns about the electric shortages of the summer of 1997 and fears that they could happen again, Wisconsin PSC Commissioner Joseph P. Mettner has indicated that the state's energy supply outlook for the summer of 1998 appears much better in eastern Wisconsin than it did one year ago.

Mettner noted that Wisconsin's electric supply system is operating with expected reserve margins of 19.2 percent. But he cautioned that electric power flows do not respect borders.

TELCO UNIVERSAL SERVICE FUND. Reversing an appeals court, the Kansas Supreme Court upheld a decision by the Kansas Corporation Commission that had required wireless telecommunications carriers to contribute to the state's universal service fund. It also affirmed a KCC ruling setting the initial amount of the fund in a roundabout way based on equalizing inter- and intrastate long-distance rates.

The KCC order (issued Dec. 27, 1996) had slashed intrastate toll rates by $111 million over three years. It then cut access charges by an equal amount to offset the loss to toll carriers.

AT&T and U S WEST scored points with investors, but PacTel's AirTouch deal failed to move the market.ell before the Telecommunications Act of 1996 was signed, it had become abundantly clear to telephone companies that they would need to change their organizational or corporate structures to keep pace with the changing business and regulatory climate.

The question, however, was how to make that structural change pay off on Wall Street (em how to use the reorganizati

In opening its investigation of electric utility restructuring, the Utah Public Service Commission (PSC) has begun by directing PacifiCorp to submit a legal analysis of the "cost-based standard" for ratemaking, as enunciated two years ago in a state supreme court opinion.

In 1994, the court had overturned an incentive regulation plan OK'd by the PSC for a local exchange telephone carrier because it ignored statutory cost-of-service principles.

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.