Fortnightly Magazine - August 1995

Wisconsin Aims for Municipal Tax Fairness

The Wisconsin Public Service Commission (PSC) has initiated a rulemaking to introduce an alternative method of calculating the tax equivalent for municipal utilities. The tax equivalent is calculated annually and represents the amount of money a municipal utility pays directly into the municipality's general fund. The rulemaking responds to concerns that the tax equivalent was excessive when compared to the gross receipts taxes paid by investor-owned utilities.

Mass. Requires Innovative Financing for Water Plant

The Massachusetts Department of Public Utilities (DPU) has granted preliminary approval to a water utility's proposal to "project finance" the cost of a new treatment facility required to comply with federal and state laws. The utility, Massachusetts-American Water Co., had proposed forming a special purpose corporation solely to finance the plant. The new corporation would lease the facility to the utility, using the payments to repay tax-exempt bonds issued under the financing plan.

HLP Tariff Must Recover Marginal Cost

By a 2-1 vote, the Texas Public Utilities Commission (PUC) has placed a condition on approval of Houston Lighting and Power's (HLP) experimental tariff for special contract pricing (Rate Schedule SCP) with industrial customers whose electric power needs are or can be served by alternative sources of power: The floor of the rates must be designed to recover marginal costs (Docket No. 12957). The order on rehearing affirmed an earlier PUC decision shortening the term of the contracts from the proposed 7 to 10 years to 5 to 10 years.

NPPA Proposes Single Operator Transmission System

The New York Power Authority (NYPA) favors restructuring opportunities consistent with a statewide,

single-operator transmission system. Their proposed model, submitted to the New York Public Service Commission (PSC) as part of the "Competitive Opportunities" proceeding, envisions an independent system operator that would own and operate all transmission facilities in the state. Alternatively, NYPA would agree to a consortium in which owners cede their facilities to a single operating entity via a contractual relationship.

Death by Taxes: Gas Utilities Face a Crippling Disadvantage in Energy Marketing

Genuine competition - with greater efficiency and bona fide service improvements - is not unwelcome at most utilities. But spurious competition, with inconsistencies among players in the rules of the game, is a cause of frustration for utilities and customers alike.

Regulation in the natural gas industry is evolving rapidly. And on the electric side, the current flurry of activity is likely to draw on recent gas industry experience and move even faster.


Efforts to site new facilities for the disposal of hazardous waste (HW) and radioactive waste have met with utter paralysis. HW disposal companies have spent hundreds of millions of dollars trying to site new landfills and incinerators for this waste, but most of this money has gone down the drain. Since the enactment of the chief federal law on HW, the Resource Conservation and Recovery Act of 1976 (RCRA), only one new HW landfill has opened on a new site in the United States (in prophetically named Last Chance, CO).

Green Pricing: Removing the Guesswork

"Green pricing," at typical rates of customer participation, could expand demand for renewable energy beyond current levels by more than an order of magnitude, pushing down production costs for energy resources preferred by environmental advocates. And just as important, that expanded demand would occur outside of the regulatory framework (em matching capacity to customer needs and wants.In practice, the utility asks customers to pay rate premiums to fund the production or purchase of renewable resources.

Marketing & Competing

New business opportunities, improved internal communications, and energy information services: three solid reasons electric utilities should form a telecommunications strategy (if they haven't already). Yet, while these motivations are compelling, none really demands utility participation.

Utility R&D: The Cutting Edge of Competition

As electric utilities move ever closer to all-out competition, senior executives are streamlining their organizations, reducing spending, and developing strategic plans to ensure their company's future success. Organizations that cannot substantiate their contribution to the company's financial bottom line risk major budget cuts.

FERC Denies Partnership Income Tax Allowance

For the first time, the Federal Energy Regulatory Commission (FERC) has issued opinions disallowing income tax allowances in the cost of service with respect to income from limited partnership interests held by individuals. In Lakehead Pipe Line Co., Ltd. Partnership, the FERC found that allowing a tax allowance for limited partnerships made up of individuals would give the investors an after-tax return on equity higher than they are entitled to (Docket Nos. IS92-27-000, et al.).