Fortnightly Magazine - May 15 1997

Pennsylvania's Electric Restructuring: How the View Changed

An insider recounts the twists and turns that led to a new state law and new rights for the state's electric consumers. On Dec. 3, 1996, Gov. Tom Ridge signed into law Pennsylvania's Electricity Generation Customer Choice and Competition Act (em a historic statute that will introduce competition in the retail market among suppliers of electric generation. The act passed primarily because of strong leadership from the governor and others.

New Mexico Sets Take-Over Precedent

Cities throughout the U.S. contemplating take over of a privately owned utility may be more likely to move forward now that the governor of New Mexico signed legislation that has made such a prospect easier in that state.

New Mexico Gov. Gary Johnson (R) on April 11 signed H.B. 1181, which allows the city of Las Cruces to condemn property owned by El Paso Electric Co., paving the way for the municipality to take over the local electric distribution system.

"We're very pleased," said Christopher Good, a spokesman for the city. Las Cruces plans to move forward from here, he added.

Preference for Flat Rates Drives Gas Charge Restructuring

While directing PNM Gas Services ( a division of Public Service Company of New Mexico) to reduce rates for gas service, the New Mexico Public Utility Commission has redesigned residential rates to reinstate the once-discredited notion of recovering fixed costs in the commodity charge.

In the same case, the commission also rejected recovery of discount costs and other fees the utility paid and a proposal by the utility to "rebundle" sales and transportation rates by end-use class.

The PUC ordered PNM to reduce gas service rates $6.958 million.

Why Special Contract Discounts are Good For Electric Competition

Professor Shepherd sees selective price cutting as anti-competitive, but even a monopolist should be allowed to compete on price.

As the electric industry deregulates, state public utility commissions are asked increasingly to allow the local utility to offer price discounts to large-load customers who might otherwise turn to other sellers. So far, nearly all the PUCs faced with this issue have agreed that such discounts are beneficial: They help retain large-load customers, who help pay the utility's fixed costs.

Minnesota Plans for Nuclear Fund Relief

The Minnesota Legislature is poised to pass a bill that would allow the state to take full advantage of any relief granted by federal courts in pending cases over the U.S. Department of Energy's nuclear waste disposal obligations.

State Senator Steve Murphy and state Representative Steve Timble introduced the legislation, which has support in both Houses. The legislation was introduced to ensure that state ratepayers would see immediate relief if ordered by federal courts in pending cases in the next several months.

Load-Management Programs Canceled

The Virginia State

Corporation Commission has authorized Delmarva Power and Light Co. to close two experimental load-management tariffs to new customers.

Nevertheless, the utility said it would continue to call upon existing program participants to mitigate system emergencies throughout the year.

One program, established in 1988, offered billing credits to customers who agreed to establish a firm service level and then curtail load to that level at the company's request during peak management billing months of June through October.

Pricing Off the Tariff: How to Figure the Maximum Supportable Electric Rate Discount

A simple formula method shows utilities exactly how much to discount prices. Electric utilities have drawn attention recently (and criticism from some quarters) for granting off-the-tariff discounts to customers deemed at risk for migration to lower-priced competitive alternatives. Typically, utilities have offered discounts to high-load customers in exchange for a long-term purchase commitment providing either more certain earnings, higher expected earnings, or both.


With the end of monopoly in electric generation, utilities can assure savings by taking a creative approach to state and local taxation.

Deregulation of electric generation will force electric utilities to examine closely their state and local tax burden. Under deregulation, most state and local taxes will not be part of a reimbursable rate structure. Rather, such costs will directly influence bottom-line profitability.

Local property taxes take a big bite out of electric generation profits. Coal suppliers of utilities pay significant local taxes.

Federal Judge Hears Antitrust Complaints on Heat Pump Promotions

A U.S. federal district judge in Pennsylvania will allow a jury to hear antitrust complaints lodged by heating oil dealers challenging certain promotional activities by Pennsylvania Power and Light Co., but it will exclude from jury deliberations any consideration of whether PP&L had established a "monopoly" in the home heating market.

During the period the utility had allegedly engaged in the promotional activities, its share of the entire home heating market had never exceeded 31 percent, the court said.


When the phone rang it was Tom Mathews, director of mechanical and energy services at Hannaford Bros., the grocery chain that has become better known for shaving utility bills than trimming pork chops.

Mathews made news two years ago when Hannaford had threatened to install generating plants on site at some or all of its 140 or so retail stores, clustered in New England and the north and southeast states. Now he was calling to tell me about his new plan.