Fortnightly Magazine - March 1 1995

A New Index Prices the Market

California, Oregon, and Nevada have developed a regional response to pricing transparency.

The electric utility industry has turned the corner away from monopoly regulation and into the competitive marketplace. No big surprise. Since the late 1970s, consumers have faced increasing sticker shock. In addition, customers want the same choices over electricity purchases that they have with other products.

Illinois Coal Bias Slapped Down

The U.S. Court of Appeals for the Seventh Circuit has struck down as unconstitutional Illinois' 1991 Coal Act, which required state utility regulators to develop pollution control plans aimed at maximizing the use of high-sulfur coal mined in the state. The Act also allowed scrubber costs associated with the use of high-sulfur coal to be passed through to ratepayers.

Look Twice Before Diversifying into Telephony

Most electric utilities have invested heavily in building private telecommunications networks. In fact, U.S. utility telecommunication networks combine to form the largest private network, second only to that of the Department of Defense. While these networks improve power system control and operational efficiency, they typically contain excess capacity available for sale to other companies. Given increased competition in their core business, many utilities are currently reviewing opportunities to use this excess network capacity.

Midland Nuclear Project Cost Upheld

The Michigan Court of Appeals has upheld a 1991 ruling by state regulators permitting Consumers Power Co. to recover $760 million in costs associated with its abandoned Midland nuclear generating project. The utility had requested recovery of over $2 billion after it halted construction in 1984.

The court rejected claims by ABATE, a ratepayers group, that the commission lacked authority to apply a "prudent investment" test to recovery of plant costs regardless of whether the investments eventually proved necessary or beneficial.

Metering Relationships in the Era of Deregulation

Deregulation is a battle over metering relationships with commercial customers, not a struggle between competing suppliers of energy.

As long as the local electric utility emerges from the process with exclusive control over its metering, credit, and billing relationships, then deregulation will only cement its position as the customer's primary energy service provider (em and further enhance the "pool" concept by which the local utility acts as agent for the retail customer to purchase energy from independent power pr

Florida Opens Special Access Markets

The Florida Public Service Commission (PSC) has decided to remove long-standing prohibitions on the resale of special access and private line telecommunications services provided by local exchange carriers (LECs) in the state. It said customers were more concerned about price and quality of service than whether facilities used to provide service were leased or owned by their provider. It added that recent restructuring of private-line service tariffs now ensured that LECs recover the cost of providing such services.


Merger planning is touchy business. In a hotel crowded with utility executives gathered together to talk mergers, you notice everything: Who's there and who isn't. Who's talking to whom. Who came with his lawyers. And who's always out in the hall on the phone.

That's why I had so much fun last month at the Eighth Annual Utility M&A Symposium, sponsored by EXNET (Public Utilities Reports and The Management Exchange).

Ohio Oks Toledo Edison Merger

The Ohio Public Utilities Commission (PUC) has approved a merger agreement between Cleveland Electric Illuminating Co. and Toledo Edison Co. The utilities, wholly-owned subsidiaries of the same holding company (Centerior Energy Corp.), argued that the PUC had no statutory authority to review the details of the merger and should either dismiss or approve the application.


Larry Hobart, executive director of the American Public Power Association, plans to retire on July 1, ending a 35-year career with public power. Hobart became executive director in 1986, and previously served in several management positions. Hobart also serves as v.p. and board member of the Consumer Federation of America.

Pacific Enterprises, parent of Southern California Gas Co., has restructured the company, to include a new Office of the Chairman. The new office will be headed jointly by Willis B.

Appeals Court Faults Pipeline Return Award

The U.S. Court of Appeals for the District of Columbia Circuit has overturned a Federal Energy Regulatory Commission (FERC) gas pipeline order, finding that the FERC had failed to support its decision to use a hypothetical capital structure in determining the pipeline's revenue requirement. In setting rates for Transcontinental Gas Pipeline, the FERC found the corporate parent's equity ratio of 16.27 percent abnormally low.