Fortnightly Magazine - July 15 1997

N.Y. Would Reimburse Bypassed QFs

The New York Public Service Commission has set up procedures to reimburse qualifying cogeneration and small power production facilities if any of the state's seven investor-owned electric utilities should curtail purchases of power from the QFs. The Independent Power Producers of New York Inc. blasted the decision.

The PSC said it will review QF requests for reimbursement if a utility is alleged to have curtailed purchases unfairly.

Electric vs. Gas Cont...

Mr. Lindsay's March 1 letter (PUBLIC UTILITIES FORTNIGHTLY, p. 6) requires some further discussion. We do agree that reducing cooling seasonal peak electric demand is desirable. Lessening the electric infrastructure's environmental effects and electric system failures, as we witnessed in the summer of 1996, is to the public good. However, thermal storage systems have siting issues and the potential to run out of capacity at the worst possible time on peak days.

KU Energy, LG&E Would Merge

KU Energy and LG&E Energy have announced a merger agreement that could save the companies more than $760 million over 10 years and result in a rate cut of almost 2 percent for each of the next five years.

KU Energy, the parent company of Kentucky Utilities Co., and LG&E Energy, the parent of Louisville Gas & Electric Co., on May 21 announced the agreement to merge into a new holding company called LG&E Energy. The transaction is valued at more than $3 billion, with the combined companies holding assets of more than $4.7 billion.

Securitization: It Can Work

I was surprised and disappointed at the limited and unbalanced perspective that Bruce Radford brought to his comments on securitization ("Wall Street's New Game," PUBLIC UTILITIES FORTNIGHTLY, April 15, 1997, p. 4).

The article implies that the push for securitization legislation is being driven by the investment community's desire to create an investment product with a guaranteed return.

PECO Gets $1.1 Billion

At a proceeding marred by hecklers and the arrest of five protesters, the Pennsylvania Public Utility Commission finalized a preliminary decision awarding PECO Energy Co. $1.1 billion of its requested $3.8 billion in stranded cost recovery (Docket R-00973877).

On May 8, by a 4-1 vote, the PUC issued a nonbinding order to allow PECO to refinance the $1.1 billion in stranded costs at lower interest rates through issuance of asset securitization bonds to be paid over 10 years.

Ratepayers Will Save

I read with interest your editorial regarding securitization in the April 15 edition of PUBLIC UTILITIES FORTNIGHTLY. As the chairman of the New York State Standing Committee on Energy & Telecommunications, I must take issue with your inclusion of statements from opponents to such legislation without providing its sponsors with the opportunity to press their case.

The Senate, on March 19, 1997, passed legislation that I sponsored at the request of Gov. George E.

Competition Bill Dies in Connecticut

Connecticut's proposed electric restructuring legislation, H.B. 6774, died after being dropped unexpectedly by the state Senate. Backers of restructuring legislation plan to reintroduce the bill next year when the new session begins in February 1998.

The bill would have opened markets to competition Jan. 1, 2000, coupled with a 10-percent rate cut. Under the bill, utilities would have recovered up to 65 percent of stranded costs for above-market nuclear investments and 100 percent for regulatory assets. The bill would have allowed securitization of those costs.

Real Water Rates on the Rise

While the prices play catch up, utilities and regulators should start looking for ways to mitigate costs.

Water utility rate increases have outpaced those of other utilities. In fact, water rate increases since 1984 %n1%n have surpassed the overall rate of inflation. Yet among utility services, water remains a real bargain; consumers spend less on water than on any other utility.

Perspective

Does a monopolist aim to maximize profit, or simply to hide from the antitrust laws?

AT&T's absolute monopoly in the switched long-distance telephone market ended in 1976 when MCI rolled out its Execunet service. Twenty years later economists still question whether AT&T can influence the market price of long-distance services.

Recent empirical studies are split on the question, sometimes finding AT&T has considerable market power, and sometimes finding it has none.

It appears that economists studying the long-distance industry may be misinterpreting the historical record.

Increased Exports to Northeast Prove a Dubious Proposition

New England states, feeling threatened by increased pollution from Midwest coal-fired generation, recently began lobbying for tougher national environmental standards tied to electric deregulation legislation. The perceived threat is based on the belief that coal-fired plants in the Midwest with excess capacity will increase exports to higher-cost New England states. This increased generation and exportation could lead to more pollution in the New England states.

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