Fortnightly Magazine - April 1 1996

Vermont Narrows Focus on Electric Restructuring

In a generic case, the Vermont Public Service Board (PSB) has announced guidelines for the development of restructuring plans for the electric utility industry. It asked the parties to the case to focus on the issues of customer choice, stranded costs, and stranded benefits. Plans for broad, industrywide restructuring must also address: 1) economic net benefits, 2) jurisdiction, 3) interstate coordination, 4) policy balance and fairness, and 5) pragmatic concerns such as competitive or market distortions.

Off Peak

As this snapshot look at the seven utility mergers announced since January 1995 demonstrates, traditional patterns are no longer being followed. A number of the announced transactions did not fit squarely into either the merger-of-equals model (little or no premium, fairly even equity and board split, CEO succession plan) or the acquisition model (high premium, disparate equity and board split, no CEO succession plan).

S&P Wary of CPUC Restructuring

Standard & Poor's (S&P) plans to maintain negative outlooks on the three largest California electric utilities (em Southern California Edison (SCE), San Diego Gas & Electric (SDG&E), and Pacific Gas & Electric (PG&E). Although it considers the California Public Utilities Commission's (CPUC's) December 20 electric restructuring order "reasonably favorable," S&P will not reexamine the ratings until it is sure the plan will be finalized as proposed. S&P's concern is that some members of the California State Senate believe small customer interests would not be adequately protected.

States Squabble Over Sierra Pacific Merger

While it has lifted a stay that had delayed approval of the merger between Washington Water Power Co. and Sierra Pacific Power Co., the Washington Utilities and Transportation Commission (UTC) has rejected the use of "single-system pricing" to average costs between divisions in the new company, Resources West Energy Corp.

Michigan Asks NRC to Act on Fuel Cask Procedures

Michigan Attorney General Frank J. Kelley has filed a request to intervene in an action pending before the Nuclear Regulatory Commission (NRC). The action concerns the NRC's failure to address a request by Consumers Power Co. to unload spent, high-level nuclear fuel from a defective cask at the Palisades nuclear plant.

Kelley is filing in support of a petition by two consumer groups that want the NRC to prevent Consumers from using dry-cask storage because the utility has violated its license to operate that system.

Costs Denied for Pipeline Oversubscription

The California Public Utilities Commission (CPUC) has concluded that Pacific Gas and Electric Co. (PG&E) acted imprudently in deciding to enter a 15-year contract for interstate capacity on Transwestern Pipeline Co. expansion projects that came on line in 1992. It disallowed recovery of the costs associated with the Transwestern commitments in 1992 and in each subsequent year of the 15-year contract. The disallowed amount for 1992 is $13.6 million for the utility's gas department and $4.5 million for its electric department.

SMUD Eyes Transmission Market

The Sacramento Municipal Utility District (SMUD) will hold a series of public forums on a new plan to offer electric transmission service under its wholesale point-to-point tariff. SMUD wants to divide its transmission system into five "highways," each carrying a

separate price tag capped at SMUD's cost-of-service (em ranging from $0.43 to $2.93 per kilowatt-hour per month.

California Orders Tracking for Pipeline Reservation Charges

The California Public Utilities Commission (CPUC) has directed Southern California Gas Co. (SoCalGas) to set up a special account to track savings from reduced reservation charges for interstate gas pipeline capacity. The cost savings will track efforts by SoCalGas to reduce capacity reservations on the El Paso and Transwestern pipeline systems.

The CPUC also set up a process to review allocation of savings between core and noncore customers.

CFTC Approves NYMEX Futuresb Contracts

The Commodity Futures Trading Commission (CFTC) has approved the New York Mercantile Exchange (NYMEX) applications for electricity futures contracts on delivery at the Palo Verde Switchyard in Arizona and at the California-Oregon border (COB).

Both contracts use a unit of 736 megawatt-hours (Mwh) delivered over one month. The delivery rate is 2 megawatts in every hour of the delivery period of 16 onpeak hours (0600 to 2200 hours). Both the rate and the period may be amended by mutual agreement of the buyer and seller.

Virginia Sets Rules for Local Telco Competition

The Virginia State Corporation Commission (SCC) has approved final rules for competition in the state's local telephone market, providing minimum certification and other standards for new market entrants. The rules permit subsequent negotiated resolution of controversial issues, such as interconnection rates and terminating traffic compensation, and preserve the right to evidentiary hearings when needed.