Fortnightly Magazine - December 1996


The spectre of retail competition in electricity presents some difficult but solvable technical problems in creating new markets. It could lead to a new world of regulation. At the least, it will expose some currently protected utilities to potential losses that could prove substantial.

This prospect of losses has inspired some high-cost utilities to mount a formidable defense of the status quo, coupled with an aggressive offense to shape the transition.

Penn. Updates Gas Transport Rules

The Pennsylvania Public Utility Commission (PUC) has adopted new rules for intrastate gas transportation tariffs filed by local distribution companies (LDCs) in the state. Earlier in the year it had issued a set of "tentative" regulations to serve as a basis for discussion of changes in the gas industry. See Re Gas Transportation Tariffs, 169 PUR4th 212 (Pa.P.U.C.1996).

According to the PUC, the final rules are based on a "reasonable sharing" of opportunities, risks, and obligations.

Marketing & Competing

Virtual DisCos? Utilities might be stepping out,

but outsourcers could be cutting in.Wholesale competition and the prospect of competitive retailing are leading many electric utilities to turn their distribution activities into discrete business units. But the emergence of the "DisCo" as a distinct entity may only mark the first step in a more radical disaggregation.

Why the distribution business may see radical change isn't immediately apparent.

Gas LDC Offers Residential Transport Options

The Pennsylvania Public Utility Commission (PUC) has authorized Columbia Gas of Pennsylvania, Inc., a local distribution company (LDC), to 1) expand transportation "to potentially capture all residential customers," and 2) institute a voluntary capacity-assignment pilot for residential and small commercial users only. The new transportation service will give residential customers the option of purchasing gas from a marketer by allowing them to aggregate in groups of up to 50 to meet the 5,000-Mcf volume threshold in the tariff.

Majority Whip Introduces Restructuring Bill

Signaling the direction he believes the 105th Congress should take, Rep. Tom DeLay

(R-TX) on the last day of the 104th Congress introduced legislation, H.R. 4297, "The Consumers Electric Power Act," to bring competition to the nation's electric industry.

Nevada Plans for Electric Bypass

As part of its ongoing investigation of electric industry restructuring, the Nevada Public Service Commission (PSC) has issued a report and solicited comment on appropriate regulatory response to customer bypass requests.

IRS Eyes Taxes in Debt - Equity Swaps

According to Chadbourne & Park, LLP, the Internal Revenue Service (IRS) is auditing U.S. companies that bought shares in foreign utilities in recent privatizations to determine whether they should have paid U.S. taxes.

All of the transactions involve debt-equity swaps, which can take many forms. For example, a U.S. company interested in buying shares in a foreign utility first goes into the market to buy bonds of the foreign government.

Telco Must Slash ISDN Rates

The Pennsylvania Public Utility Commission (PUC) has decided that Bell Atlantic-Pennsylvania, Inc., a local-exchange telephone carrier (LEC), should reduce rates for its residential digital high-speed service offerings. The residential Integrated Service Digital Network (ISDN) service enables users to access and send voice, data, and imaging services at the same time over their telephone lines.

FERC to Examine Market Dominance for NiMO

The Federal Energy Regulatory Commission (FERC) has conditionally approved market-based power-sales rates for Plum Street Energy Marketing, Inc., an affiliate of Niagara Mohawk Power Corp. (NMP) (Docket No. ER96-2525-000). It also set for hearing the issue of whether transmission constraints result in market dominance by NMP or its affiliate.

Plum Street's application to market and broker electric power states that it would not market power to NMP unless so authorized by the FERC.