Fortnightly Magazine - May 15 1997

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.

S&Ls won damages when the feds reneged on promises. Utilities could do the same.

It's tough to be a utility CFO these days. For decades, electric utilities have served both as target and conscripted agent of government policy. Utilities pay disproportionately high taxes. Utility rate structures further distort market forces with subsidies flowing from business to residential. These policies actually defeat market forces. To large measure, many of these market failures arise from reconciling the hangover from uneconomic policy initiatives.

I am writing to express my concern over the Feb. 1 publication of the article, "Why Applicants Should Use Computer Simulation Models to Comply With FERC's New Merger Policy" (p. 22). The authors, Mark W. Frankena and John R. Morris, have used the editorial pages of PUBLIC UTILITIES FORTNIGHTLY to deliver a highly commercial message promoting their preferred computer model at the expense of several other software packages, which they specifically name.

Regarding the Hanser, Wharton and Fox-Penner article on real-time pricing ("Real-Time Pricing (em Restructuring's Big Bang," PUBLIC UTILITIES FORTNIGHTLY, March 1, 1997, p. 22), the authors state that RTP programs will defer capacity needs and reduce peak loads. I doubt it. People don't mind paying high prices per kWh for a few hours each year. On the other hand, there is nothing like an old-fashion ratchet to get people to reduce their peak demand.