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Fortnightly Magazine - July 1 1996

Who's Covered, Who Isn't

The term "parachute payment" includes "any payment in the nature of compensation to . . . a disqualified individual . . .

For purposes of this section, an individual is a disqualified individual . . . if . . . the individual is an employee or independent contractor of the corporation and is

a) A shareholder [More than $1 million or one percent of fair market value]

b) An officer, or

c) A highly compensated individual

. . . .

The term 'officer' implies continuity of service. ...

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Tax Corner

Many executives of publicly held utility corporations have written severance agreements to protect them in the event of a change in control. However, these severance packages remain vulnerable to attack by acquirers.

Two separate threats are emerging. One involves a direct attack on drafting flaws in the plan documents. The other, more subtle, threat lies in the impact and interpretation of the special "Golden Parachute" rules under the Internal Revenue Code. This second threat warrants attention.

Byline: 
Arthur I. Anderson, and Stephen C. Ploszaj
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Frontlines

At the end of May, Consumers Power Co. issued a press release that caught my eye. In four short paragraphs, the company said it had filed an application with the state public service commission (PSC) seeking approval of a private power-supply contract with James River Corp. Consumers Power ranks James River as its 23rd largest industrial electric customer.

Byline: 
Bruce W. Radford
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In Brief...

Sound bites from state and federal regulators.

Offsystem Gas Sales. Florida permits new LDC tariff for sales to offsystem customers. LDC recovers all variable costs, including $100 administrative charge per transaction; splits nongas charges with firm customers, crediting administrative charges to PGA rate. Docket No. 960185-GU, PSC-96-0482-FOF-GU, Apr. 5, 1996 (Fl.P.S.C.).

Master Metering.

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People

Marc W. Chupka, former special assistant to Energy Secretary Hazel R. O'Leary, has been promoted to acting assistant secretary for policy. He replaces Dan Reicher, now O'Leary's chief of staff. Melanie A. Kenderline was appointed deputy assistant secretary for House liaison in the office of congressional, public, and intergovernmental affairs.

MidCon Corp.'s president and CEO, John F. Riordan, was elected chair of the Gas Research Institute, succeeding Thomas L. Fisher of Northern Illinois Gas Co.

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Phantom Taxes: The Big Paycheck

The restructuring debate in the electric industry has focused on nuclear assets at risk for "stranding" under deregulation, while another issue has largely eluded public scrutiny: accumulated deferred federal income taxes (ADFITs). ADFITs represent money that utilities have received from ratepayers to cover federal tax expenses not yet actually recognized and paid.

Byline: 
David M. Wise
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Mailbag

Curbing Market Power

or Power Markets?

In their article, "Curbing Market Power: The Larger the Better" (Apr. 15, 1996, p. 10), Christopher D. Seiple and Douglas M. Logan show that market-share indices can be derived from commercially available databases. The authors reference their soon-to-be-released study, U.S. Electric Utility Industry Mergers and Acquisitions, as a source for further market-power assessments.

The topic is timely. The U.S.

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LILCO to Promote Customer Choice

The New York Public Service Commission (PSC) will permit Long Island Lighting Co. (LILCO), a natural gas local distribution company (LDC), to institute temporarily a series of tariff revisions designed to enhance customers' ability to choose competing suppliers of natural gas.

According to PSC staff, the LDC's plan to offer a new array of firm transportation choices constitutes a "reasonable alternative" to full disaggregation of existing sales rates.

Byline: 
Phillip S. Cross
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Joules

Three separate utilities have formed subsidiaries:

s The Columbia Gas System, Inc.'s new unit, Columbia Service Partners, Inc. will market new, nongas needs to homeowners and businesses, including warranty, fuel management, and gas-line repair services.

s Brooklyn Union's new gas marketing affiliate, KeySpan Energy Services, Inc., will buy and sell gas and provide transportation and related services, first to commercial and industrial customers, then to aggregated commercial and residential customers.

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Circuit Court OKs Abandoned Plant Cost Recovery

The U.S. Court of Appeals for the District of Columbia Circuit has upheld a Federal Energy Regulatory Commission (FERC) ruling that permits Yankee Atomic Electric Co. to recover all costs associated with an abandoned nuclear plant.

In 1992, the utility decided to shut down its nuclear facility in Rowe, MA, after investigating safety concerns raised by the Nuclear Regulatory Commission.

Byline: 
Phillip S. Cross
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