Fortnightly Magazine - April 1 1996

Gas Price Behavior: Gauging Links Between Hubs and Markets

Price disparities make hedging difficult (em all the more since futures close before bid week ends. Even so,

a strategy helps.

Gas markets in the United States are complicated, dynamic, and evolving. They offer significant commercial opportunities for some companies, commercial hazards for others.

Many companies find it difficult to estimate the price they will receive for gas the next year, month, week, or day.

PURPA Debate Inches Forward in House

Divest yourself of generating plants or allow retail sales by competitors, and PURPA's mandatory purchase clause in section 210 will no longer hold.

That's the basic deal to be offered to investor-owned electric utilities under the Electric Power Competition Act of 1996 (H.R. 2929), a new bill to amend the Public Utility Regulatory Policies Act (PURPA) introduced by Rep. Edward J.

California Retains Affirmative Action Targets

The California Public Utilities Commission (CPUC) has decided not to increase voluntary goals for utility purchases from businesses owned by minorities and by women. The CPUC has also amended its rules on affirmative-action purchasing plans to state that "no penalty shall be imposed for failure of any utility to meet and/or exceed goals."

In 1988, the CPUC had set a goal that utilities must seek to purchase 20 percent of their goods and services from firms listed in the state-mandated program: 15 percent from minority firms and 5 percent from firms owned by women.

FERC Investigates ISOs

The Federal Energy Regulatory Commission (FERC) on January 24 held a technical conference on independent system operators (ISOs) and power pools, as part of its electric transmission open-access Notice of Proposed Rulemaking (NOPR). The FERC's question: Is it necessary in a competitive market for utilities to transfer control over transmission facilities to ISOs, and if so, what form should ISOs take? (18 CFR Part 35, Docket Nos. RM95-8-000 and RM94-7-001).

Low-usage Customers Bumped from Dsm Program

Despite complaints from customers, the Florida Public Service Commission (PSC) has approved Florida Power Corp.'s plan to reduce incentive payments under existing load-management rate programs by one dollar, and

to limit eligibility to customers that use at least 600 kilowatt-hours. The PSC said the usage limitation would "restore the cost-effectiveness" of residential load management, which is designed to reduce peak demand, not energy usage.

The Economics and Politics of Western Coal

Wyoming and Montana

are cracking Midwest coal markets,

despite local protectionism.

As pressures build steadily toward deregulation and increased competition between electric power generators, Western low-sulfur coal is emerging as the most economical fuel option for an increasing number of companies. The low cost of delivered fuel and avoidance of capital outlays offer attractive savings.

Pipelines Gain Rate Flexibility

The Federal Energy Regulatory Commission (FERC) has approved a policy statement, Alternatives to Traditional Cost of Service Ratemaking for Natural Gas Pipelines, giving pipelines greater flexibility to use market-based, negotiated/ recourse, incentive, and other alternative rates (Docket Nos. RM95-6-000 and RM96-7-000). Pipelines may negotiate new rates with customers, but may not negotiate services that might degrade open-access service under Order 636. The FERC is still considering what type of service flexibility it should allow.

Industry Reorg. Prompts Same at Corporate Level

The California Public Utilities Commission (CPUC) has approved a corporate reorganization plan making San Diego Gas and Electric Co. (SDG&E) a wholly-owned subsidiary of a holding company structure formed by the utility. The utility said the reorganization would provide the separation of lines of business necessary to insulate regulated utility cash flows from the volatility and risk of competitive markets.

Blowing the Whistle on the Coal Train

Before the express train leaves the station, it's worth taking a look at the facts about new electric generating capacity in the United States.

Natural gas has become the primary energy source, accounting for about two-thirds of new capacity during the 1990. In contrast, market share for coal-which currently accounts for over 40 percent of all online capacity, and about 55 percent of online fossil-fuel capacity-is expected to grow only 10 to 15 percent in this decade.