Fortnightly Magazine - May 15 1997

Half-Hearted Competition Christopher Seiple & Barbara O'Neill

With the implementation of the Energy Policy Act and the FERC's Orders 888 and 889, competition has been introduced into wholesale power markets. It is limited in scope, however, as utilities are still able to recover their fixed generation costs and embedded cost of capital from their captive retail markets. This limited competition impedes progress towards the development of a more efficient generation system in the U.S. and provides only modest benefits to retail customers.

Currently, generators compete only in wholesale markets and not in retail power markets.

Byline: 
Christopher Seiple, and Barbara O'Neill
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Divestiture Moves Forward

New England Electric System has received preliminary proposals from 25 potential buyers for the purchase of its generation business.

The proposals, which were due March 25, are from utility affiliates, independent power producers, and energy companies.

New England Electric System noted that buyers would gain an immediate presence in the regional energy market, which opens to competition in mid-1997 for some Rhode Island customers, and in January 1998 for Massachusetts and New Hampshire customers.

Byline: 
Lori A. Burkhart
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Local Telco Must Continue Centrex Offerings

The Minnesota Public Utilities Commission has rejected a proposal by U S WEST Communications Inc. to discontinue offering its Centrex family of business services to new customers.

According to the commission, the local-exchange carrier's plan would make it much harder for new resellers to enter the local telephone market and seriously hamper the development of competition in the state.

U S WEST had claimed that misapplication of "Centron/Centrex" offerings by smaller users had resulted in significant "tariff arbitrage" of basic business service.

Byline: 
Phillip S. Cross
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Electric Restructuring Across the Country

Some states have become well-known for their regulatory or legislative initiatives on electric restructuring and customer choice. Among those drawing the greatest attention are California, New Hampshire, Rhode Island, Massachusetts, New York, and Texas.

At press time, reports were filtering in of legislation about to be introduced in Montana and North Carolina (em states that might be considered unlikely subjects for competitive initiatives.

Byline: 
Kenneth M. Simon
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Cooperative Dumps Soyland for Cinergy

Southwestern Electric Cooperative Inc. has notified Soyland Power Inc. it will terminate its electric supply contract and buy its full requirements from Cinergy Corp.

The cooperative said it can buy the wholesale power from Cinergy at a lower price. It is expected to start receiving electricity in April under a five-year contract. The agreement includes other services Cinergy may provide to Southwestern Electric Cooperative, such as economic assistance and new-business development opportunities.

Byline: 
Lori A. Burkhart
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Gas LDC to Revamp Business Development Rates

The New York Public Service Commission has authorized Brooklyn Union Gas Co., to amend its existing business-incentive and area-development rate programs.

Brooklyn Union provides rate reductions for new or expanding businesses in 26 specified regions under the area-development program. It also has provided similar benefits for new or expanding businesses under a system-wide, business-incentive rate program.

Byline: 
Phillip S. Cross
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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.

Byline: 
John Hanger
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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.

Byline: 
Elizabeth Striano
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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.

Byline: 
Phillip S. Cross
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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.

Byline: 
Paul F. Hanzlik, and David B. Goroff
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