Fortnightly Magazine - August 1995

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.).

Technology's Strategic Role

The electric utility industry is undergoing its most profound change since Thomas Edison and George Westinghouse battled over whether the American power system should be AC or DC. In essence, that technological choice shaped the industry we know today. Edison's low-voltage, DC system would have required many small generating stations and short distribution lines. The high-voltage Westinghouse AC system promoted development

of long-distance transmission networks that deliver electricity efficiently from large, remote power plants.

Nuke Decommissioning Funds Get Investment Flexibility

The Federal Energy Regulatory Commission (FERC) has adopted a final rule for nuclear plant decommissioning trust funds that will allow greater investment flexibility and enable funds to take advantage of changing market conditions (Docket No. RM94-14-000). The rule aims to improve the returns earned on funds contributed through wholesale electric rates, thereby decreasing the amount collected from ratepayers.

Promoting Industrial Evolution

This country's 350,000 manufacturers must add cutting-edge technologies to their processes to stay competitive. Yet most are small- to medium-sized companies leery of investing in new technology without first

confirming its effect on their

products.Some utilities previously had no option but to run local technology-demonstration facilities on their own (see sidebar on p.

Columbia Gas Bankruptcy Moves Forward

The Federal Energy Regulatory Commission (FERC) has approved an uncontested settlement for bankrupt Columbia Gas Transmission Corp. (CGT), resolving over 100 FERC proceedings and over 40 court appeals (Docket Nos. GP94-2-003 et al.). The settlement addresses CGT's recovery of costs associated with its former merchant function. It also settles customer claims in CGT's bankruptcy proceeding, subject to bankruptcy court approval.

Nuclear Registration: The Untold Story

Last year was pivotal for nuclear power. On May 13, 1994, the board of directors of the Washington Public Power Supply System (WPPSS) voted 9-4 to terminate reactors WNP-1 and WNP-3, triggering a dismantling of the two mothballed reactors, both about 70 percent complete. For ratepayers in the Pacific Northwest, the decision offered no relief from bills for construction of the two plants (em recently estimated at about $350 million per year for the next 24 years1. In many ways, WPPSS and its troubled history is a microcosm of the U.S.

Financial News

Annual Annual EPS

Close Close Percent 52-Wk 52-Wk Div Div Book P/E Last

Company Region 03/31/95 06/30/95 Change High Low Rate Yield Value Ratio 12 Mos.Electric Utilities

AEP Company Inc. Midwest 31.75 35.13 10.63 35.75 29.00 2.40 6.83 22.68 13 2.68

Unicom Corp. Midwest 23.75 26.63 12.11 27.75 20.63 1.60 6.01 24.39 14 1.90

Union Electric Co.


With this issue I've finished up my first 12 months as full-time editor of PUBLIC UTILITIES FORTNIGHTLY. During that time, I've tried to adhere to few simple rules. If I'm lucky, I'm batting four out of five:

s Trust ideas, not facts

s Welcome different views

s Don't shy from difficult subjects

s Make it easy to read

s Take a day off now and then.

Someone once said that an editor's job is twofold: "Simplify and exaggerate." That advice may sound peculiar, but one could do worse.

N.H. Finds Power to Open Electric Franchises

In an important case involving electric retail competition, the New Hampshire Public Utilities Commission (PUC) has made a series of legal rulings favoring a proposal by Freedom Electric Power Co. to purchase and resell power to end users currently served by Public Service Co. of New Hampshire (PSNH). The PUC ruled that franchises granted to electric utilities in the state are not exclusive and that the proposed activities would make the energy company a public utility if approved and implemented.