Fortnightly Magazine - January 1 1996

NYSEG Proposes Price-cap Plan

New York State Electric & Gas Corp (NYSEG) and related parties have agreed to a settlement that would freeze natural gas prices for nearly three years, from December 1, 1995, until July 31, 1998. NYSEG would eliminate the gas adjustment and weather normalization clauses, and establish a service-quality incentive, setting earnings, rewards, or penalties based on performance.

N.Y. High Court Affirms Royalty Revenue Adjustments

The New York Court of Appeals, affirming a lower court ruling (Rochester Telephone Corp. et al. v. New York Public Service Commission, 201 A.D.2d 31, 155 PUR4th 511 (N.Y.App.Div.)), has upheld the authority of state regulators to use a "royalty" to reduce rates for services provided by local exchange carriers (LECs). The royalty was designed by the New York Public Service Commission (PSC) to compensate ratepayers for transfers of

intangible assets to unregulated subsidiaries.

Wisconsin Releases Restructuring EIS

The Wisconsin Public Service Commission (PSC) has drafted a 425-page (plus appendices) environmental impact statement (EIS) as part of its investigation into restructuring (Docket No. 05-EI-114). The EIS examines a number of different proposed models. The "status quo" model would maintain the present regulatory structure, but the PSC admitted that the present rate case structure is time-consuming and does not respond quickly to changed circumstances.

The "plausible extreme" model proposes a single transmission system owner.

Cost Shift to Residential Gas Users Uphold

The Arkansas Court of Appeals has upheld a decision by state regulators permitting Arkansas Louisiana Gas Co., a natural gas local distribution company, to allocate the total amount of a recent rate increase to residential users. According to the Arkansas Public Service Commission (PSC), applying the entire $4.9-million increase to residential users was an appropriate means of preventing system bypass by larger customers, consistent with prior efforts at removing interclass subsidies. (See, Re Arkansas Louisiana Gas Co., a division of Arkla, Inc., 150 PUR4th 333 (Ark.P.S.C.

N.Y. PSC Calls for Speed

The New York Public Service Commission (PSC) has proposed accelerated restructuring of the electric industry in Phase II of its "competitive opportunities" proceeding (Case No. 94-E-0952). The proposal calls for wholesale competition by 1997, retail competition by 1998, separating generation from transmission and distribution, and forcing utilities to absorb a portion of their stranded investment.

Moody's Investors Service believes the proposal has generally negative credit implications for New York's investor-owned utilities.

VA High Court Upholds LEC Price-cap Plan

The Virginia Supreme Court has upheld the state's decision to implement a price-cap

alternative regulation plan for Bell Atlantic-Virginia, Inc., a telecommunications local exchange carrier (LEC). Rejecting an appeal brought by the American Association of Retired Persons and other consumer groups, the court concluded that the Virginia State Corporation Commission had adequate support for its decision to replace existing ratemaking methods.

Merger in the Midwest

Puget Sound Power & Light Co. (PSPL) and Washington Energy Co. (WE) have agreed to merge, projecting $370 million in savings over the next 10 years from elimination of duplicate corporate and administrative programs, and integration of field operations and facilities. About 45 percent of the savings would come from an 8-percent reduction in combined workforces.

Illinois Court Rejects Electric Anti-bypass Rates

An Illinois Appellate Court has reversed a ruling by the Illinois Commerce Commission (ICC) that had allowed Commonwealth Edison Co. to enter negotiated rate contracts with up to 25 large general-service customers to retain existing load. The ICC had ruled that the antibypass tariff would not conflict with state laws requiring filing and publication of utility rates, because it must contain a description of the pricing and service parameters used in negotiating the individual contracts.

Gulf States Beats Cajun in First Round

U.S. District Judge Frank Polozola issued a memorandum opinion on October 24, supporting Gulf States Utilities (GSU) against fraud claims made by Cajun Electric Power Co-op. (CEPP), involving its decision to invest in the River Bend nuclear plant. Judge Polozola will issue detailed reasons for the decision at a later date. (GSU owns 70 percent of River Bend; CEPP owns 30 percent.)

A second phase of the lawsuit involves breach-of-contract claims, but GSU and its parent company, Entergy, say they will attempt to settle all remaining issues.

Ohio Proposes Rules for LEC Competition

The Ohio Public Utilities Commission (PUC) has issued a proposed framework for competition in the local exchange telephone market. In a separate opinion, PUC chairman Craig A. Glazer noted that new market entrants in the state appear to be dominated by Time Warner.