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Fortnightly Magazine - June 15 1997


Christopher Seiple

In the electric industry restructuring debate lurks an important issue: If utilities recover some level of stranded costs, how do you design a cost recovery mechanism that minimizes stranded costs? This issue is important because, among other things, it will affect total customer savings.

One way to encourage utilities to mitigate stranded costs is to allow recovery of only a portion of costs. For instance, the California stranded cost recovery mechanism provides utilities with a "fair opportunity" to recover all of their stranded costs.

Electric Transmission: Jury Still Out on Flow-Based Pricing

Bruce W. Radford

Dominion Resources touts its "impacted" method, but opponents call it a "stalking horse" (em a scheme to avoid full review at FERC.

Is the Federal Energy Regulatory Commission prepared to accept true marginal-cost pricing for electric transmission?

With all the criticism leveled at the traditional "contract path," one would think that the FERC would consider a new approach to transmission pricing.

In fact, last year in its final Order No.


New Environmental Technologies Inc. agreed to acquire Keystone Energy Services Inc. The new company will be called Keystone Energy Services. In an alliance with New Energy Ventures Inc., it plans to target the $22.5-billion California electric market. Keystone will re-sell part of the $500 million worth of power New Energy Ventures recently agreed to buy from the Bonneville Power Administration. Keystone will focus on small- to medium-sized electric consumers while its partner will target industrial, commercial and government accounts.

Maryland Says Electric Merger Won't Harm Market

Phillip S. Cross

The merger of Baltimore Gas and Electric Co. and the Potomac Electric Power Co. will not harm consumers by restraining competition in the electric market, according to the Maryland Public Service Commission.

The commission approved the merger provided Baltimore Gas and Electric lowers its customers' electric rates by $43.876 million and PEPCO lowers its Maryland customers' rates by $12.101 million. The competitive effect of the merger was still under examination at the federal level.

Legislative Briefs

State-by-state prospects for electric customer choice.

New Mexico. Public Service Co. of New Mexico asks state PUC to begin collaborative process to draft legislation to allow retail choice of electric suppliers (Case No. 2681). Draft would be proposed to the state's Interim Legislative Committee on integrated Water and Resource Planning, for possible passage in the 1998 legislative session. By mid-June, the utility intends to initiate a plan to allow customer choice by a date certain, defining methods to handle stranded costs and reliability.

Nevada. Nevada Power Co.

N.J. Cautious on Gas Adjustment Clause Reform

Phillip S. Cross

Citing concerns about gas price volatility, the New Jersey Board of Public Utilities has ruled that Public Service Electric and Gas Co. should maintain its existing annual fuel cost adjustment mechanism rather than shift to a monthly charge as originally proposed for its local gas distribution customers.

Under a settlement approved by the board, the LDC will have the option to impose the monthly charge on its general-service and large-volume customers.

Power Shortages Loom With Shutdowns

Lori A. Burkhart

Midwest and New England Are Threatened

To head off potential problems, states in the Midwest and New England are reacting now to impending plant shutdowns, which are threatening to cause serious electric supply shortfalls this summer.

The Midwest. The shutdown of Wisconsin's two nuclear plants, Kewaunee and Point Beach, is predicted to cause the state's worst power shortage. In addition, up to five coal-fired plants were scheduled for maintenance shutdowns. To deal with the anticipated shortage, the Wisconsin Public Service Commission on April 22 adopted an emergency plan.

Texas Orders Nuclear Write-Down

Phillip S. Cross

In the first major rate proceeding under a new state law bringing competition to the wholesale electric market, the Texas Public Utility Commission has ordered Central Power and Light Co. to accelerate recovery of above-market generating investments and reduce and unbundle its rates.

The commission said the aging of existing electric facilities and the development of new technologies were driving generation costs down.

ConEd Wants Controversial Industrial Rate Cut

Lori A. Burkhart

A controversial electric restructuring settlement proposed by Consolidated Edison Company of New York to the New York Public Service Commission, which includes a 25-percent rate cut for some industrial customers, was attacked as hostile to small customers.

ConEd filed the plan in response to the PSC's efforts to develop a new framework for the state's electric industry in its "Competitive Opportunities" proceeding (Case 97018/96EO897). ConEd's proposed five-year plan would run through March 31, 2002 and cut rates by $655 million.

Proposal Details.

Ohio Examines Electric Competition in Cleveland

Phillip S. Cross

The Ohio Public Utilities Commission has rejected a request by Cleveland Electric Illuminating Co. to expand its competitive discount pilot program into the western portion of the city. The program currently targets commercial customers in the eastern side of the city.

While finding that competition does exist "to some degree" on the west side of Cleveland, it does not encompass the entire area targeted by the utility's proposal, the commission said.