Fortnightly Magazine - January 1 1996


Thomas L. Yohe of Philadelphia Suburban Water Co. was appointed to the Cleanup Standards Scientific Advisory Board. The 13-member board is a new division of Pennsylvania's Department of Environmental Protection.

NorAm Energy Corp. has formed a new unregulated retail subsidiary, NorAm Energy Management (NEM), and appointed Rollie Bohall senior v.p. and COO. David Houghtby, formerly of Minnegasco, will be NEM v.p.

Financial News

When Niagara Mohawk Power Corp. announced its competitive restructuring plan on October 6, 1995, it broke ranks with what had been a curiously united front against competition. The opposition had learned to genuflect before the altar of competition, but then fight doggedly to keep markets closed. This united front had implied that competition would produce largely the same impact on all utilities, but that is not true. Competition offers lucrative long-term opportunities for some utilities and potential disaster for others.


In a recent article ("The Efficient Utility: Labor, Capital, and Profit," Sept. 1, 1995), Taylor and Thompson attempt to measure the

economic efficiencies of 19 investor-owned utilities.

The authors use a method of efficiency measurement proposed by M.J. Farrell in a pioneering paper published nearly 40 years ago.

Electric M&A: A Regulators Guide

In a little over a year, the electric utility industry has seen six significant mergers.1 This trend toward consolidation most likely will increase as the industry becomes more competitive.

Nymex Moves on Options Contracts

The New York Mercantile Exchange (NYMEX) has asked the Commodity Futures Trading Commission (CFTC) to approve two applications for electricity options contracts, one based on each of the futures contracts already under consideration by the CFTC. (This past summer, NYMEX applied to offer trading in two electricity futures contracts, one for delivery at the California-Oregon border, and the other for delivery at the Palo Verde switchyard in Arizona.)

Except for delivery location, the terms of the two contracts are identical.

Moody's Finds Regulatory Change Slow

In its annual report on the U.S. electric industry, Moody's Investors Service has concluded that the average credit rating for the industry will deteriorate from its present 'A3' level to 'Baa1' over the next two to three years.

Idaho Project Sale of Local Exchanges

Diverging from the position taken by regulators in other states in the region, the Idaho Public Utilities Commission (PUC) has rejected proposals by U S WEST Communications, Inc., a

telephone local exchange carrier, to sell certain local

exchanges to independent telephone companies. It approved, however, a proposal to sell one of U S WEST's exchanges to a telephone cooperative association. Re U S WEST Communications Inc., Case Nos. PRJ-T-94-1; USW-S-94-4, Order No. 26198, Oct. 18, 1995 (Idaho P.U.C.).

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.