Fortnightly Magazine - December 1995

Maine Approves Electricity Price Hedging

The Maine Public Utilities Commission (PUC) has authorized Bangor Hydro-Electric Co. to enter into oil price-swap and price-cap transactions. The utility said that the since the PUC had eliminated its fuel adjustment clause in an earlier proceeding, it had sought ways to reduce the risk associated with fuel price changes. The oil "price hedges," seek to set Bangor's future cost of oil by requiring the parties to pay a settlement amount if the actual price, as published by a well-recognized source, should vary from the price contained in the agreement.

Columbia Gas Settles Class Action Suits

U.S. District Court Judge Joseph Farnan, Jr. on October 16 approved a $36.5-million settlement resolving class action lawsuits alleging securities laws violations against the bankrupt Columbia Gas System (CGS).The lawsuits were filed by various security holders against CGS, its independent public accountants, the underwriters of its 1990 stock offering, and certain officers and directors. CGS's portion of the settlement amounts to $16.5 million, with the remainder shared among the insurance carriers of various defendants.

Idaho Approves Sierra Pacific Merger

The Idaho Public Utilities Commission (PUC) has approved the merger of Washington Water Power Co. with Sierra Pacific Power Co. and its corporate parent, Sierra Pacific Resources. Pursuant to the terms of the merger agreement, the surviving entity will become Resources West Energy Corp., a Nevada corporation authorized to conduct business in Nevada, Washington, Oregon, California, and Idaho.The utilities estimate that the merger will save ratepayers $514 million over a 10-year period, with nearly half the savings attributable to reductions and alterations in workforce.

Consumers Power Locks Up GM

Consumers Power Co. has entered into long-term sales contracts with General Motors Corp. (GM) to supply all electricity for at least 10 years to 6 of GM's largest plants, and for at least 5 years for 13 of GM's other large facilities (total service of 450 megawatts).The facilities, which account for 65 percent of the utility's "at-risk" industrial electric load and 22 percent of its industrial load, will receive rate discounts in exchange for the long-term commitments.

Telecommunications -- Regulatory Update

State regulators continue to update methods of pricing telecommunications services, using price caps for local exchange carriers (LECs) while expanding existing pricing flexibility for interexchange carriers (IXCs). The emerging trend toward inviting competitors to serve the local market, including basic local exchange service, also continues. Some of the activity mirrors ongoing developments at the federal level, such as major regulatory reforms under debate in the Congress and court-supervised modifications to existing service restrictions stemming from the AT&T divestiture.

Ohio Edison Faces Antitrust Suit

Youngstown Thermal (YT), a steam provider, has filed a lawsuit against Ohio Edison Co., seeking more than $3 million in damages for alleged anticompetitive practices. An August 31 ruling by the Ohio Public Utilities Commission (PUC) found that Edison's contract to provide cooling services to the Mahoning County jail allowed for revenues below the utility's actual cost of providing service, and was negotiated for the purpose of destroying competition.

Virginia Approves Gas-supply Cooperative

The Virginia State Corporation Commission (SCC) has approved a plan by two natural gas local distribution companies (LDCs), Washington Gas Light Co. and Delmarva Power and Light Co., to join with other regional LDCs to form a cooperative to provide for the coordination and use of common capacity, storage, transportation, and supply assets. According to the LDCs, the East Coast Natural Gas Cooperative was a necessary response to recent changes in the gas industry, which shifted responsibility for arranging gas supplies from interstate pipelines to LDCs.

Perspective

Almost everyone in America has heard of Cal Ripken, Jr. But have you ever wondered what you and the utility industry have in common with him?There are at least three things. Let me tell you how I know.

On September 6, 1995, Cal Ripken broke Lou Gehrig's record of 2,130 consecutive baseball games played. I was privileged to attend that special game at Oriole Park at Camden Yards with my son Michael.

Gas PGA Reforms Stalled

The Missouri Public Service Commission (PSC) has rejected a proposal by customers of Missouri Gas Energy, a division of Southern Union Co. and a natural gas local distribution company (LDC), to modify the LDC's purchased gas adjustment (PGA) clause so that it applies solely to sales customers. The customers had claimed that the structure of the PGA predated provision of transportation service on the system and was currently used as an inappropriate vehicle for collecting nonpurchased gas costs from customers that no longer purchase supplies from the LDC.

Marketing & Competing

When the Salt River Project (SRP) held a series of focus groups in 1994, one participant said he related to our products and services, and felt he received good value for his monthly payments. Unfortunately, a few questions later, we discovered that he did not live in our service area, his bill was higher than he thought, and he wasn't particularly pleased after all.

We were more than a little taken aback.

V