The winds of competition are blowing. Some find them chilling; others find them exhilarating. Deregulation calls on competitive markets to stand in for regulatory decisions, giving more choice to customers, reducing costs dramatically, and requiring new capabilities.
Competition is already transforming major portions of the electric industry.
The Nuclear Regulatory Commission (NRC) has amended its regulations on nuclear plant license renewal to provide a "more stable and predictable regulatory process." The amended regulations will enhance the credibility of the NRC's existing regulatory oversight process and licensee maintenance programs by narrowing the number of systems, structures, and components that must be reviewed during the renewal process. Operating licenses are granted for periods up to 40 years, and may be renewed for 20 more if NRC requirements are met.
As the debate over restructuring the U.S. electricity industry moves forward, there comes a host of new theoretical models. Two proposals in particular serve well to frame the debate.
Tennessee Valley Authority (TVA) chairman Craven Crowell says he will resist General Accounting Office (GAO) pressure to raise TVA rates. According to Crowell, a forthcoming GAO report criticizes TVA for not raising rates to reduce debt, and suggests privatization. "Everyone recognizes that TVA's debt is large, but the size of the debt is not as important as our ability to manage it," Crowell maintains, noting that a recent study by utility consulting firm Palmer Bellevue concludes that TVA can remain competitive by effectively managing the debt.
In his article, "Entering the Appliance Repair Business" (Feb. 1, 1995), Gordon Canning paints a bleak picture for independent contractors seeking to prevent utilities from entering the appliance repair business. However, contrary to Mr. Canning's suggestion, at least one utility has been forced to withdraw from this business.
The Federal Energy Regulatory Commission (FERC) has upheld its February 22 ruling that the California Public Utilities Commission (CPUC) violated federal law by not considering all electric power sources in determining the avoided costs of electric utilities (Docket Nos. EL95-16-001 and EL95-19-001). A unanimous FERC had found the CPUC's Biennial Resource Plan Update auction in violation of the Public Utility Regulatory Policies Act (PURPA).
"It could have been worse."
"It says to the market, `It won't be so bad.' It will take longer now, so that's better for the utilities."
"It creates a new bureaucratic entity that will make regulatory choices."
"It's regulated deregulation. It's alarming if that's the prototype for the nation."
That's the word, respectively, from Barry Abramson at Prudential Securities, Edward J. Tirello, Jr. of NatWest Securities, Steven Fetter at Fitch Investors Service, and Dan Scotto of Bear Stearns.
One need only reflect upon the primary sponsors of current efforts to repeal section 210 of the Public Utility Regulatory Policies Act of 1978 (PURPA) to begin to understand the folly of these efforts for the nation. The sponsors do not represent electricity ratepayers, who are claimed to be overpaying billions of dollars as a result of PURPA.
Philip R. Sharp, former 10-term congressman from Indiana, has been named director of the Institute of Politics at Harvard University's John F. Kennedy School of Government. Sharp assumes the position on July 1, succeeding Charles Royer, former mayor of Seattle, WA.
NICOR Inc. has elected Thomas L. Fisher, currently president and COO, to the additional position of CEO. Fisher will continue as president and CEO of Northern Illinois Gas Co., the company's largest subsidiary.
Charles W.
Does competition justify higher salaries for utility executives? Some regulators have suggested the opposite. Others argue that ratepayers must benefit directly from any incentives offered to utility managers.
The Vermont Public Service Board (PSB) recently forced stockholders to pay a share of executive compensation costs for two utilities (em Green Mountain Power Co. and Central Vermont Public Service Corp. (em that exhibited higher-than-average executive compensation, and capped compensation for rate cases.
