Fortnightly Magazine - May 1 1997

Joules

Zond Development Corp. will supply MidAmerican Energy Co. with 45 MW of wind-generated power per month for 20 years. Terms of the agreement were not released, but Zond will begin supplying energy within three years of regulatory approval. The contract helps fulfill the utility's alternate energy requirements under Iowa law. Zond will generate the power from about 150 wind turbines planned for Buena Vista County. The windmills will interconnect with the MidAmerican transmission system at a nearby substation.

Gas Utility Gets Burned on the Spot Market

Motivated by numerous consumer complaints regarding substantial, unexpected increases in bills for natural gas service, the New Mexico Public Utility Commission has fined Public Service Company of New Mexico, finding that the utility knowingly understated gas cost data in prior adjustment clause filings to avoid commission review of an ongoing gas price crisis.

The commission suspended the $2.2-million fine, however, in light of its decision to prevent PSNM from collecting more than $1.5 million in purchased gas revenues associated with the understated gas cost projection.

Moody's Predicts Securitizations Will Win High Ratings

Moody's Investors Service has concluded that a properly structured securitization backed by the future cash flow from a utility's stranded investments can achieve a credit rating higher than the rating of the senior debt of the utility.

Moody's said this ability bodes well for the increasing number of investor-owned utilities expected to issue up to $75 billion of such securities by 2000 to recover uneconomic investments.

Off Peak

Robert Blohm and Professor William Hogan recently traded op-ed letters in the Wall Street Journal on the "poolco" and "bilateral" models for wholesale power markets:

Writing first, Blohm (an advisor to Ontario's Macdonald Committee on electric competition) praised bilateral trading (individual buyers and sellers agree on price).

LG&0E Cuts PacifiCorp Out of Big Rivers Deal

In a court-ordered auction held March 19, a federal bankruptcy court judge selected a proposal by LG&E Energy Corp. to lease the generating assets of Big Rivers Electric Corp.

LG&E Energy will lease about $1.3 billion of the generating assets of the bankrupt Henderson, Ky., cooperative for 25 years, and provide power to Big Rivers to serve its member cooperatives and 90,000 customers.

Previously, it appeared PacifiCorp would get the lease agreement, which is the centerpiece of the Big Rivers' reorganization plan. But U.S. District Judge Jennifer B.

Oregon PUC Staff Set To Nix Combo

A senior staff member of the Oregon Public Utilities Commission has informed Portland General Corp. and Enron Corp. that the PUC plans to recommend disapproval of the proposed merger between the two utilities.

The decision will run in the staff's final report, which is expected to be released April 11. "We are not trying to kill the merger," said Phil Nyegaard, PUC staff member.

The staff believes that Enron's offer of $61 million in guaranteed cost savings and rate reductions does not provide sufficient benefits to meet the mandates for merger approval.

LIPA Takes Over LILCO

The Brooklyn Union Gas Co. and The Long Island Lighting Co. have agreed with the Long Island Power Authority for LIPA to acquire all of the Long Island Lighting Co.'s electric transmission and distribution system, plus substantially all of its regulatory assets and its share of the Nine Mile Point 2 nuclear plant.

The transaction would take place through a stock purchase from the holding company, which Brooklyn Union and Long Island Lighting Co. will form.

Enid, Okla., Flights to Municipalize

The city commissioners of Enid, Okla., voted to buy the portion of the electric distribution system of Oklahoma Gas and Electric Co. located within city limits, in agreement with a buy-out clause contained in the franchise agreement between the utility and the city.

The city's 25-year franchise agreement with Oklahoma Gas & Electric will expire in June 1998, but Enid must notify the utility one year in advance if it wants to terminate the agreement.

Perspective

Every electric utility is looking for new ways to market energy to customers. And why not? Hospitals and other health care organizations constitute one customer segment sorely in need of a new marketing campaign. Even so, the utilities are making many mistakes. The health care sector can present a unique challenge to the utility marketing professional.

The first mistake that utilities make is assuming that hospitals are run like businesses. Technically, hospitals are not businesses. Hospitals do not function like businesses.

Three "Workshops" Down, More "Work" to Do

Electric's Players Tell Senate Panel Where to Jump In, Butt Out

With three hearings behind it, what has the Senate panel on electric restructuring learned from regulators, utility execs and other industry types who have testified?

Granted, some candor has emerged from all the maneuvering and positioning typical of electric industry and sector leaders, but is that enough for the Senate Committee on Energy and Natural Resources to develop a position on federal legislation, without input from energy consumers and the voting public?

Sen. Frank H.