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Fortnightly Magazine - March 1 1997

Seven Myths of Real-Time Pricing

Myth 1. RTP increases the utility's costs and revenue requirements. %n1%n

Reality 1. A well-conceived RTP program reduces the utility's costs and revenue requirements.

RTP programs can reduce peak demands for power, increase off-peak demands, and reduce the need for additional peak-load capacity. This increase in efficiency can lead both to higher company profits and greater customer savings. As the electric industry becomes more competitive, these savings will flow to those customers most responsible for lowering the utility's costs.

Byline: 
Albert L. Danielsen & Nainish K. Gupta
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Perspective

Prospects look good for cheaper, independent electrical power in Ontario. The market is forcing an end to the current impasse on energy policy. Reforms are apt to include "wholesale access," which should arrive in the province before the year is out. Otherwise, Ontario may lose jobs to neighboring provinces and states.

Byline: 
Alexander J. Black
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Competition Moves N.Y. To Protect Core Gas Supply

Concerned that competition in the natural gas market might affect reliability of gas supply for core customers, the New York Public Service Commission has adopted new short-term curtailment procedures for the states natural gas local distribution companies.

According to the commission, the new procedures "recognize the restructured natural gas industry," and require that in the event of short-term interruptions or force majeure curtailment situations, the needs of core customers are met first.

Byline: 
Phillip S. Cross
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Real-Time Pricing - Supplanted by Price-Risk Derivatives?

RTP assumes that price spikes will deter load. But how will customers behave if they've hedged against that risk?

Tomorrow's electricity industry promises a wealth of pricing options as wholesale generation becomes more like a commodity. Spot pricing marks one example. And with spot markets will come a greater need for price derivatives (em hedge contracts that will permit customers to trade or shed risk to achieve a higher degree of price certainty.

Byline: 

Mike O'Sheasy

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Washington Briefs

FERC Gives Guidance To Foreign Affiliates. The Federal Energy Regulatory Commission on Jan. 15 denied a petition by British Columbia Power Exchange Corp. (Powerex), the power marketing affiliate of British Columbia Hydro and Canada-utility Power Authority (BC Hydro) to sell power at market-based rates.

The order marked the first time the FERC showed how it will apply Order 888's open-access requirements to foreign utility affiliates (Docket No. ER97-556-000).

"I look forward to Powerex taking another run at this issue," says Commissioner James Hoecker.

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N.Y. Court Upholds PSC's Electric Restructuring Plan

A New York supreme court (Albany county) has affirmed a May 1996 order by state public service commission to restructure the state's electric utility industry, upholding PSC's "flexible retail poolco" model and authority to direct utilities to file plans for further review.

The court ruled that the PSC may deregulate generation and compel separation of generation, wires, and energy marketing functions. Moreover, the PSC need not guarantee 100-percent recovery of stranded costs, says court, but may "encourage" utilities to divest themselves of generating assets.

Byline: 
Phillip S. Cross
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