Fortnightly Magazine - March 1 1997

Oregon PUC Staff Wants M&A Conditions

The Oregon Public Utilities Commission staff has recommended the proposed merger of Portland General Electric Co. and Enron Corp. be approved with conditions, and has asked for a customer-rate reduction of $47.4 million for four years.

Subsequently, an $11.2-million rate-reduction component would remain part of electric rates until PGE's next rate proceeding. The staff would include a feature to true up rate-reduction amounts if certain future revenues exceed expectations.

In Brief...

Sound bites from state and federal regulators.

Electric Briefs

Environmental Review. California halts work on report of environmental impacts of electric restructuring and new market structure, finding no need for independent review of commission proposals after state Legislature had sanctioned "a more competitive scheme" last summer when it passed Assembly Bill 1890. R.94-04-031, I.94-04-032, Decision 96-12-075, Dec. 12, 1996 (Cal.P.U.C.).

Electric Restructuring.

Rate Proposal Disappoints Texas Utility

Central and South West Corp. President and CEO Dick Brooks is "extremely disappointed" with a proposed decision by an administrative law judge to increase annual revenues of its subsidiary, Central Power and Light Co., by $7.2 million. CPL in November 1995 had asked for a $71-million hike in retail rates.

A significant factor contributing to the difference is that the judge recommends reducing return on equity from 12.25 percent to 10.9 percent, which would reduce the rate increase by $30 million.

Alabama Finds Need for Power, Certifies Cogen Plant

Finding that Alabama Power Co. has a clear need for additional capacity in the near future (em reserves for the year 1999 will drop to approximately 9.2 percent (em the Alabama Public Service Commission has authorized the utility to pursue a utility-owned cogeneration project as the least-cost resource option.

The company plans to install a natural gas-fired cogeneration plant at an industrial facility owned by one of its larger customers. The utility will own, design, maintain and operate the

100-MW facility.

Kewaunee Nuclear Plant Is In Trouble

Due to troubles at the Kewaunee nuclear power plant, the Wisconsin Public Service Commission has agreed to allow its three utility owners to accelerate depreciation based on a plant retirement in 2002 instead of 2013. It also agreed to shorten the length of time decommissioning funds can be set aside.

The plant had shut down Sept. 20, 1996, for routine repairs and was expected to open one month later when damage to steam generators was found to be greater than expected. Replacing them would cost about $100 million.

DSM Program Victim of Market Reforms

The Idaho Public Utilities Commission has allowed Idaho Power Co. to terminate an "industrial efficiency" conservation program designed to promote the installation of energy efficient equipment by both industrial and large commercial users through the use of grants awarded by the utility.

The commission found that the way to implement such goals is changing in light of electric industry restructuring, while declaring its continuing support for utility investment in conservation and renewable-based resources.

Phone Wars Ripen in 440-plus Locales

A year after passage of the Telecommunications Act of 1996, more than 440 local phone markets are ripe for competition, says a new report.

According to its second Competition Report, the U.S. Telephone Association says nearly every state has open markets.

In 1995, market-share losses in high-capacity local business service were 39 percent in Philadelphia; 35 percent in Pittsburgh; 32 percent in Washington, D.C.; 27 percent in Baltimore; 39 percent in Los Angeles; 37 percent in San Francisco; 50 percent in New York City; and 37 percent in Boston.

Minnesota Identifies Environmental Adders

The Minnesota Public Utilities Commission has adopted a schedule of environmental costs for electric utilities evaluating and selecting resource options in all commission proceedings including resource-plan and certificate-of-need cases.

In each such case the utilities will be required to provide three cost analyses for each generation-option provided: one using the values at the low end of the range (see table), one using values at the high end of the range, and one reflecting "direct costs only" (i.e., using zero environmental externalities values).


Real-Time Pricing-Restructuring's Big Bang

The electric industry hasn't seen so much upheaval since Thomas Edison threw the switch at the Pearl Street Station. Full retail access to competitive markets in generation and supply will challenge traditional ways of doing business. But no change will prove more dramatic for electric utilities than setting a competitive price (em that most fundamental of business decisions.

In anticipation of competition, utilities have been experimenting to discern what forms of the "product" (em electric power (em customers might want, and at what prices. One such experiment is real-time pricing.

Minnesota Eyes Tax Issues Via Study

The Minnesota Department of Revenue and the Minnesota Department of Public Service have released a study finding that electric and natural gas utilities pay higher taxes in certain categories than in other states in the region, which could put Minnesota at a disadvantage as the utility industry becomes increasingly competitive.

The study, mandated by the 1996 state Legislature, finds that in addition to paying high real estate taxes, utilities also pay personal property taxes on machinery and equipment. However, in 1996, Gov.