News Digest

Deck: 
PUC Oversight: Panacea or New Problem?
Fortnightly Magazine - October 1 2000

News Digest


 

Transmission & ISOs

Return on Equity. The FERC upheld a 10.56 percent return on common equity approved by an administrative law judge (ALJ) for electric transmission service provided by New York State Electric & Gas Corp., even though the ALJ relied on the same two-stage method for estimating dividend growth (commonly applied in gas pipeline rate cases) that the commission rejected in the Southern California Edison case in late July as inappropriate for the electric industry, and where it set a higher return of 11.6 percent.

It said that the 10.56 figure was acceptable for NYSEG because it fell within the reasonable range that would have emerged had the ALJ used the preferred method. .

QF Power Purchases. In a transmission rate case, the Federal Energy Regulatory Commission ruled that Niagara Mohawk had failed to justify a rate allowance for expenses it paid to qualifying cogeneration facilities (QFs) to cover so-called "avoided transmission costs," after the New York PSC had OK'd that item as an element of purchased power rates owed to QFs under the Public Utility Regulatory Policies Act (PURPA).

The FERC implied that the NY PSC had violated PURPA by adding such costs to QF rates, but said it would not rule on the point, since the NY decision was not at issue in the federal case. It then added that even if the state PSC had erred, that would not require disallowance. Instead, it explained that Ni-Mo had offered no evidence on why cost of purchased power should be recovered through transmission rates. .

Congestion Contracts. Morgan Stanley Capital Group asked the FERC to postpone an auction planned by the New York ISO to sell long-term transmission congestion contracts (TCCs), for contract terms running between two and five years. The investment firm claimed it was too early to allow such long-term contract commitments, since the ISO had not yet filed its report to the FERC on various software problems, market imperfections, and charges of bid and price manipulation raised earlier in the summer in various cases pending before the commission.

The complaint asked the FERC to limit the terms for TCCs to six months-the same term that applied to most TCCs sold in a prior auction in April. Said Morgan, "Incredibly, NY ISO plans to sell long-term TCC commitments in a market place that the FERC views as transitional, flawed and marked by uncertainty." .

Imbalance Charges. New Horizon Elec. Co-op., an importer of energy and capacity, asked the FERC to rule on whether a transmission provider can bill a customer for energy imbalance service whenever the customer's actual load deviates from scheduled load, even though the customer buys power from a remote supplier and uses dynamic scheduling to switch dispatch control to the control area operated by the remote supplier. .

Black Start Service. To comply with a prior FERC order, the New England Power Pool filed a tariff for "black start service"-system restoration and planning service (SRPS)-which bills transmission customers only through a monthly charge allocated on the basis of respective network load, internal point-to-point reservations, and unauthorized use charges, which will reflect actual equity and debt capital costs of utilities providing SRPS. .

State-Mandated Divestitures. Virginia regulators gave the state's electric utilities until Oct. 16-one day after the FERC's first deadline under Order 2000-to file plans for divesting ownership or control of transmission assets under the Virginia state law that requires formation of regional transmission groups. .

 

Power Markets

New England Price Peaks. Northeast Utilities, United Illuminating Co., and the Maine PUC all filed similar complaints asking the FERC to compel ISO New England to recalculate the unprecedented price peaks of $2,870 and $6,000 per megawatt-hour that occurred on May 8 during hours 13-17, claiming that ISO-NE violated its own tariff rules in calculating the price.

The PUC charged that ISO-NE violated its tariff by relying on a high-priced energy import transaction from the New York control area (at $3,387 per megawatt-hour) to set the price in New England. UI added that the New York supplier had no incentive to offer a competitive bid, since it was selling energy into New England to satisfy the region's requirement for installed capacity (ICAP), and by definition energy could not qualify under the ICAP rule unless it was also priced at a level "not likely to be dispatched."

Moreover, the PUC added that ISO-NE should have mitigated the New York price after the fact, since a few days later the New York ISO itself recalculated its own price to $331 per megawatt-hour, concluding that the sale was exposed to "flaws" within the New York market.

The PUC observed that because ISO-NE refused to mitigate the $6,000 price, Bangor Hydro in Maine paid "approximately $2.7 million for energy for five hours." That cost was more than five times the amount that Bangor would have paid if ISO-NE had mitigated the price to $1,100 per megawatt-hour, the figure calculated as appropriate by the PUC. .

Reserve Requirements. The New York ISO filed a plan with the FERC to pay a rebate to those load-serving entities (LSEs) operating during the summer peak season in the New York City load pocket that failed to procure enough supply to meet the ISO's requirement for installed capacity and thus were forced to pay deficiency charges to cover the ISO's deficiency procurement auction. The rebate will cover the difference between the nominal price limit in the ICAP market of $8.75 per kilowatt-month and the higher deficiency charge of $12.50 per kilowatt-month.

The ISO concluded that the LSEs were not at fault, since capacity shortages occurred in the NYC load pocket. "As a result," it said, "the deficiency charges have become purely punitive... several LSEs have indicated that these penalties... may drive them out of the New York market." .

New York Prices. Citing "dramatic and sometimes inexplicable price fluctuations"—and its own duty to ensure just and reasonable rates—the New York PSC directed the state independent system operator to provide access to certain information that the PSC might need to assess the ISO's operation and to address implementation problems that it says have occurred "in all areas of operation." The PSC sought access to any information needed for it "to understand the interrelationships among software, market design, tariff provisions, operating rules, and bids."

The PSC said that it would require such material as bid data, equipment availability and performance, other operational data, and details about software logic, and that "all steps will be taken" to have the information given "trade secret" status.

"The pricing situation has hindered our retail access efforts and we have concerns about retail customers' rates as well as long term system reliability," the PSC said. "We also recognize an interest in expeditiously reporting instances of market power abuse." The PSC relied on its authorization to examine records and documents from any "electric corporation" in order to require access to the ISO information. .

Illinois Prices. Weighted average prices for firm capacity and energy in Illinois in the year 2001 are projected at $29.82 per megawatt-hour off-peak in the summer and $43.22 during peak summer periods in a report issued Aug. 15 by Peter A. Hoffman, of Deloitte & Touche, the "neutral fact finder" designated under the state's restructuring law. The same report forecasts non-summer firm prices at $25.97 off-peak and $34.88 at peak times.

 

California Price Wars

Relief for San Diego. In a 3-2 vote the California PUC adopted a bill stabilization plan to mitigate skyrocketing electric rates for customers of San Diego Gas & Electric Co., guaranteeing that residential customers will pay no more than $68 per month for electricity through January 2001 and $75 per month for the rest of 2001. However, residential customers will pay market rates for any electric use over 500 kilowatt-hour per month.

Commercial customers using 1,500 kilowatt-hour or less of electricity per month (about 70 percent), as well as school districts, will pay no more than $220 per month through Jan. 31, 2001, and no more than $240 per month through the end of 2001.

The decision was made retroactive to June 1; SDG&E was to issue billing credits for any June, July, and August bills exceeding the new caps.

The 3-2 vote was split along party lines, with three commissioners appointed by former Gov. Pete Wilson approving the moderate plan. PUC chair Loretta Lynch and commissioner Carl Wood, appointed by Gov. Gray Davis, preferred a tougher proposal that would have capped summer electric rates at $53 and allowed rates to be set even lower in the winter. .

Federal Emergency Measures. Wholesale electricity price spikes and the resulting skyrocketing consumer electric bills in California received President Clinton's attention on Aug. 23, when he announced three steps "to help ease the burden," including the allocation of $2.6 million from the Department of Health and Human Services in Low-Income Home Energy Assistance Program funds, as well as the directive to the FERC to expedite its investigation of the wholesale power markets. Thirdly, Clinton directed the Small Business Administration "to step up their efforts" to inform small businesses about SBA loans to help them cope with high bills. Clinton used the opportunity to reiterate the call for comprehensive federal electric restructuring legislation. "We ought to do it, and we ought to do it this year," he said.

California PX Prices. The California Power Exchange asked the FERC to approve its proposed Tariff Amendment No. 19, which would impose a maximum price of $350 per megawatt-hour in the day-ahead and day-of markets administered by the PX, for as long as the $250-per-megawatt price cap should continue in effect in the markets administered by the California ISO for real-time energy and ancillary services.

The PX selected the $350 figure to match exactly the sum of ISO's $250 cap plus the $100 ISO price for replacement reserve capacity, which the PX said had created a de facto upper limit on bids offered to the PX for short-term energy. As the PX explained, "purchasers who know they can buy energy in the ISO's real-time market have no reason to bid more in the near-term forward markets operated by the PX."

Thus, the $350 cap was not intended to change behavior or affect prices or costs, but to prevent a "migration" of transactions from the PX to the ISO. The PX added, "when supply is tight, the migration of supply from the [PX's] forward markets to the ISO market limits... hedging opportunities for buyers." .

 

State PUCs

Standard Offers. The Maine PUC amended its rules governing standard offers for default bundled electric service provided by distribution utilities, hoping that the next set of bids, starting next March, will prove more fruitful than last year's solicitation, which produced "unacceptably high" price offers and led the PUC to reject winning bids for some classes and to kill the process for other groups because there were no bids at all.

The new rules give the PUC greater control over the bid process and remove requirements that seasonally differentiated rates must be compatible with the utility's rate structure, thus giving suppliers the option of charging higher prices in the summer.

"Allowing suppliers this flexibility may... help address the concern over 'gaming' the standard offer, which can occur if customers move onto standard offer service at times of relatively higher market prices," the PUC said. It added that it would consider restricting the number of yearly allowable rate changes to four in order to minimize customer confusion and dissatisfaction.

Also, the PUC increased the "opt-out fee" that customers must pay to leave standard offer service early, but at the same time made it easier for customers to avoid the fee-by reducing the time period that must elapse before the fee is waived on a change of service-and by eliminating the fee entirely in northern Maine, where load does not peak in the summer. .

Gas Retail Choice. Looking to draw upon the experience of the pilot programs implemented by the state's natural gas utilities, the Michigan PSC opened a collaborative process to develop uniform terms and conditions for customer choice programs, to be extended eventually to all residential and business customers in the state. .

Delivery Rates. The Maine PUC OK'd settlement agreements that will allow Bangor Hydro-Electric and Maine Public Service Co. to reduce charges for distribution service to offset any increases in their retail transmission rates imposed by federal regulation, since the FERC now asserts jurisdiction over the transmission component of retail service in states where retail electric competition has forced an unbundling of services.

The offset will be accomplished without harm to the utilities' financial situation by accelerating the amortization or value contained in existing asset sale gain accounts. .

Gas Price Volatility. Noting recent increases in natural gas price volatility, the Michigan PSC OK'd a plan by Michigan Consolidated Gas Co. to reduce the waiting period from five years to one year before large- and small-volume transportation customers can apply to return to traditional bundled retail service. .

Consumer Education. The Texas PUC OK'd an education plan with a $12 million first-year budget to help electric utility customers understand the state's retail choice plan. .

 

Business Wire

FriedWire Inc., a recently formed Internet company serving the electric power industry, has announced its first round of financing, receiving a significant investment from Enercap Associates LLC, a Boulder-based venture capital fund. "FriedWire's vision is to improve the functioning of the electric power marketplace through Web-based, real-time information on fundamental market forces," said FriedWire founder Bill Townsend, who left Resource Data International to found FriedWire in 1999. FriedWire planned to release its first product, the Traffic Report, this summer.

Investors have begun trading Xcel Energy Inc. stock on the New York Stock Exchange under the symbol XEL, signaling the official start for the new company, formed by the $8.5 billion merger of Minneapolis-based Northern States Power and Denver-based New Century Energies. The Securities and Exchange Commission approved the merger on Aug. 17.

Dominion Retail, an energy retailer that provides natural gas and electricity as well as other products and services, has selected Peace Software International's Energy software for energy customer management. The company needed to acquired an e-commerce energy customer management solution capable of rapid, scalable market entry in order to achieve its customer growth plan of extending its stronghold in the Mid-Atlantic region over the next two to three years. Nordic Electric LLC, the largest independent, non-utility retail power provider in Michigan, also has selected Peace International's Energy software.

Fieldstone has announced the completion of the sale of Johannesburg's Metro Gas to Cinergy Global Power Inc. and its local Black economic empowerment partners. Fieldstone acted as the exclusive financial advisor to the Greater Johannesburg Metropolitan Council for the utility privatization and is also advising the council on the privatization of its electricity generation assets. Metro Gas distributes natural gas to some 50,000 industrial and residential customers in the Johannesburg region. Mincom Inc., a provider of enterprise application solutions for asset-intensive industries, and CES International, a provider of operations resource management software for utilities, have announced their strategic alliance. The relationship provides for international business development as well as the development of integration between CES International's Centricity operations resource management systems and Mincom's Ellipse enterprise applications solutions.

Studies & Reports

Customer Satisfaction. American businesses that switched their energy suppliers for lower electricity prices are measurably less satisfied than companies that stuck with their current provider, says a national survey released by RKS Research & Consulting. In fact, companies staying with their current provider give their supplier higher marks on all major dimensions of performances, from cost savings and customer service to billing and usage information. Meanwhile, businesses that changed suppliers, while acknowledging lower costs, nevertheless expressed disappointment in the level of savings, according to the survey.

"Switching suppliers doesn't always deliver improvements," said Carmine Grastataro, RKS senior vice president in charge of the survey. "For instance, only a third-33 percent-of key accounts are satisfied with their new supplier, compared with the 58 percent satisfaction level among companies that stayed with the incumbent provider." Contact Carmine Grastataro, 727-726-4595.

Wind Energy Potential. Fair access to the utility transmission system is vital if wind energy is to reach its full potential in the United States, according to a white paper released by the American Wind Energy Association and prepared by Chris Ellison, an attorney and transmission consultant with Ellison, Schneider and Harris in Sacramento, Calif.

"The 'rules of the road' for our electricity transmission system today were designed to fit the operating characteristics of conventional power plants such as coal and nuclear plants," said AWEA executive director Randall Swisher. AWEA claims that its recommendations are consistent with the needs and interests of virtually all electricity generators.

The white paper zeroes in on five policy recommendations to transmission policymakers at the FERC and the regional transmission organizations that are being formed around the country. The white paper, "Fair Transmission Access for Wind, A Brief Discussion of Priority Issues," is available at www.awea.org/policy/documents/ transmission.PDF.

Fuel Cell Trends. Direct methanol fuel cells will be the most widely used, early technology of micro fuel cells, according to a report released from Allied Business Intelligence, "Portable Fuel Cell Markets-Global Portable Fuel Cell Opportunities in Portable Applications with an Intense Focus on Wireless Applications."

The report says that the rapid global expansion in the use of cellular phones, portable personal computers, PDG devices, and the emergence of new mobile equipment to use in conjunction with such devices, will continue to fuel market growth for high-end power supplies, particularly micro fuel cells. Portable fuel cells will enter the market with 50,000 units shipped in 2002, the report says, followed by a surge to 200 million units annually only five years later in 2007. See www.alliedworld.com.

NOx Costs. If the Environmental Protection Agency requires State Implementation Plans by the end of the year, it could cost consumers between $7 billion and $12 billion to ensure that coal-fired power plants substantially reduce their nitrogen oxide emissions by 2003, since plants will rush to install expensive technology rather than take the time to explore and test less-expensive remedies that might be implemented in phases, according to a study by Fuld & Co.

"The challenge faced by the industry is that, while many people seek environmental protection, few (including legislators) want to pay more for the energy we use to heat and light our homes, fuel our vehicles, or power our factories," said the study's author, Ravi Krishnan, associate director, public utilities practice at Fuld & Co.

The study says that the issue could become "politically decisive" in the upcoming presidential election. Vice President and Democratic presidential candidate Al Gore, Jr. has said that federal funds should be allocated to help defray the cleanup costs and stabilize electric rates, while, at press time, Republican candidate and Texas Gov. George W. Bush had not commented on the EPA ruling. Contact Patti Kane, 781-444-5543.

 

Courts

PCB Contamination. A federal appeals court remanded a 1998 rulemaking case back to the Environmental Protection Agency, asking the EPA to explain why it did not act on more than a dozen comments from electric utilities asking for a nationwide variance for the electric industry from rules concerning the storage and reuse of manufactured articles (capacitors, transformers, motors, etc.) after contamination by polychlorinated biphenyls (PCBs). .

State Sales Taxes. A Florida appeals court ruled that municipal electric utilities enjoy an exemption from paying state sales taxes on purchases of plant and equipment for repair, or replacement of existing transmission or distribution systems. The court then certified the question to the state supreme court to get confirmation. .

Municipal Franchise Fees. A California appeals court dismissed most claims in a class action by some 72 cities in California against Pacific Gas & Electric Co. for underpayment of municipal franchise fees, but allowed 14 cities to go forward in the lawsuit. The court found sufficient evidence that the 14 cities might have formed municipal utility departments at around the turn of the century-a factor that, if true, would limit the extent of PG&E's franchise rights under the state constitution and imply higher franchise fees. .

 

Power Plants

Outage Responsibility. The New York PSC implemented a bill signed into law Aug. 8, directing Consolidated Edison Co. of New York Inc. to refund to ratepayers some $162 million that the utility had been charging for replacement power it purchased after the forced outage of the Indian Point No. 2 Nuclear Generating Facility (IP2) on Feb. 15, when a small amount of radioactive steam was released from the plant as a result of a tube rupture in a steam generator.

The state legislature passed the law after finding that Con Ed "failed to exercise reasonable care on behalf of the health, safety and economic interests of its customers." .

Meanwhile, on the same day, the federal Nuclear Regulatory Commission announced that its staff had cited Con Ed for three violations of "low to moderate safety significance" related to the emergency preparedness program at IP2. In a letter to the company, Region I administrator Hubert J. Miller wrote, "These failures [to meet NRC emergency planning standards] contributed to emergency response deficiencies that were exhibited during the course of the steam generator tube failure Alert Event."

Nuclear Sales. State regulators confirmed sales of utility ownership interests in a number of nuclear generating plants in the Northeast.

  • Millstone. Connecticut announced the successful sale of the 2,029-MW Millstone Nuclear Generating Station, the largest generating plant in New England, owned by Connecticut Light & Power Co., United Illuminating Co., and other minority owners, to Dominion Resources Inc. for $1.298 billion. Assets sold include 100 percent of Units 1 and 2, owned by CL&P and Western Massachusetts Electric Co., and 93.47 percent of Unit 3.
  • Hope, Salem, Peach Bottom. The New Jersey board authorized Atlantic City Electric Co. (ACE) to close the bidding to sell its minority interests (between 5 and 7 percent) in the Hope Creek, Salem, and Peach Bottom nuclear plants to majority owners PSEG Power LLC and PECO Energy Co. .
  • Oyster Creek. The New Jersey board also OK'd the sale of the 619-MW Oyster Creek nuclear plant by Jersey Central Power & Light Co. (doing business as GPU Energy) to AmerGen for $10 million. .

 

Gas Utilities

Muni Breakdown in Philly?

Philadelphia Gas Works, the largest municipally owned gas utility in the United States, is undergoing bureaucratic breakdown so severe that the city in August said it was prepared to chip in $10 million from its general fund to keep PGW afloat. According to a report in the , the muni's debt has grown so large that it will cost PGW about $90 million in interest payments during this fiscal year. The story of how it got there goes back many years, and involves politics, corruption, and technology failure.

PGW has been run by the city in some fashion for some 164 years and regulated since 1925 by a five-member gas commission, whose members now are the city controller or a representative, two city council appointees, and two mayoral appointees.

The gas commission is under the auspices of the Philadelphia Facilities Management Corp., a not-for-profit company incorporated in 1973 by the city to run PGW. The muni had been run by UGI Corp. until 1972, when then-Mayor Frank Rizzo fired UGI and started the new method of management-what many observers refer to as a patronage system. The gas commission has authority to set rates, approve natural gas supply contracts and operating budgets, and hire personnel. The gas commission and PGW face the enormous task of ensuring that natural gas flows to approximately 512,000 customers—95 percent residential—over a 129-square-mile area. But somehow they can't get it right. Due in part to mismanagement and part bad luck, their efforts seem doomed. Recently the weather contributed to the woes of PGW, when low gas demand brought about by three unusually warm winters resulted in as much as $60 million in revenue deficiencies.

Compounding problems is a new computer billing system installed in 1999 that cost three times as much as was budgeted and spit out either incorrect bills or none at all. When customers called to complain-and many did-no one answered, or if someone did, they were put on hold. An aging pipeline infrastructure isn't helping matters. The cash-strapped utility can't keep up with repairs.

Then there was an ill-fated plan to go into the electric business. PGW had signed a contract with California-based Edison Source to market electric services in the city. A problem arose when Edison Source sent materials to residential consumers of PECO Energy promising 16 percent in generation savings, when those customers actually were eligible for much less in savings. By December 1998, PGW withdrew from the electric business, and Edison Source followed in 1999. But the venture came back to haunt PGW, as evidenced by a $70,000 settlement PGW agreed to-without admitting wrongdoing-with the Pennsylvania state attorney general's office on July 13 to settle allegations of false advertising. But because John Street, then president of the City Council and now Philadelphia's mayor, had required that PGW's agreement with Edison Source protect PGW from liability, the $70,000 burden fell to Edison Source.

City residents have been in an uproar over all the bungling. The situation was worsened by scandals involving top PGW officials who were caught siphoning PGW money to personal accounts. Finally, Mayor Street in March appointed three interim executives to straighten out PGW's finance and technology problems.

PUC Oversight: Panacea or New Problem?

But the three interim executives will be getting help from an unlikely source: the Pennsylvania Public Utility Commission. That is because the problems at PGW had been evident for so long that the state's gas restructuring law includes a provision that turned its regulation over to the PUC as of July 1. The gas commission will continue to be in charge of operations and budgets, but the PUC now will set rates and investigate customer complaints.

The hope, of course, is that the PUC will pull PGW out of its financial morass. PGW, for example, while taking in $492 million in revenues in 1999, had its debt rise from $676 million in 1991 to $972 million in 1999. But some detractors argue that introducing the PUC into the situation only adds another layer of bureaucracy, and that the PUC is inexperienced at regulating municipal utilities, especially one as politicized as PGW.

In fact, PGW in June filed a $52 million rate increase request with the . PGW also asked to increase the customer charge from $8 per month to $15 per month, a total increase of about $94 million. That customer charge already recently was increased from $4 per month to $8 per month. The thinking at PGW was to file for its first rate increase since 1992—averaging about $170 per year per residential customer, or $90 million—with the gas commission because it still has authority to review the budget, and since the budget has a revenue deficiency, the gas commission should set the revenue requirement. So PGW already is asking for a waiver from PUC oversight. Another part of the thinking is that the gas commission usually decides rate cases in four months, while the PUC can take more than twice as long.

According to energy expert Jerry Lambert, senior partner in the Washington, D.C. office of Shook, Hardy & Bacon LLP, the rate oversight shift to the PUC eventually could fix PGW's problems. Lambert pointed out that the state's gas restructuring law requires that PGW file a restructuring plan with the PUC no later than July 1, 2002. But, he added, there is no guarantee that any such plan would be implemented, and, in fact, "PGW's long and tangled history of maladministration and cronyism suggests the opposite."

Future Direction: PGW Saved Or Sold?

The new PGW interim management has come up with several proposals for cost cutting. They want to end its senior citizen discount of 20 percent, because that program has no means test, merely an age test allowing even wealthy seniors to take part. PGW also would cut staff, and restructure health benefits for retirees.

But Lambert noted that for all the good intentions, it is easy to understand why PGW is resistant to change: "It is a 165-year-old municipal entity run like a political fiefdom, not a business." Lambert pointed to PGW's employment of unionized gas workers that earn above-market salaries, as well as its overall rates reflecting the higher costs of inefficient operations.

For now, the PUC has hired seven new employees who set up shop in Philadelphia to take customer complaints. The PUC has hired independent auditors to go through PGW's books in anticipation of the first PUC rate case.

But a lawsuit filed by the City Council challenges the right of the state to take away the city's control of PGW. The City Council wants regulatory oversight to stay with the gas commission. The Pennsylvania Commonwealth Court was expected to hear oral arguments in September. Added into the milieu is the state's gas deregulation law, which will allow other gas suppliers to compete in the Philadelphia gas market in September 2001.

Meanwhile, many frustrated Philadelphia residents hope that the result of the changes is that PGW becomes financially viable and an era comes to an end—that PGW is sold and the city gets out of the gas business.

Lambert agreed that PGW should be sold. He cited more problems recently found by the interim management team, including an $8.4 million bond issue designated for maintenance but used instead for operations, inability to pay the city an annual $18 million dividend, a bloated payroll, projected loss of $17 million in 2000, and a call center that loses two-thirds of its callers. Lambert noted that "such inefficiencies would be given short shrift by a private owner." He added that last year, PECO Energy's unregulated affiliate, Exelon, was among six companies bidding to take over PGW's gas purchasing operations. But despite the lure of a cut in gas purchase costs of up to $10 million per year, Lambert pointed out that "PGW has not outplaced its purchasing function, nor gone forward with a private-sector takeover."

 

Electric Reliability

Generating Reserves. Connecticut regulators concluded that with new plants going online over the next few years, the state should enjoy adequate electricity supply beyond 2000, although "increasing demand and rising environmental concerns will similarly exist."

The PUC pointed to several operational changes at ISO-New England put in place since low reserve margins threatened reliability in summer 1999, including communications enhancements that would allow participants to respond to "mismatches" in supply and demand, and the willingness of ISO-NE to curb scheduled maintenance during summer months. However, the department also recommended that the New England Power Pool and ISO-New England should improve backup/emergency generation use, nuclear outage scheduling, and dispatchable and interruptible load capabilities. It said that dispatchable load, direct control of end uses and interruptible load incentives, "which have fallen into disuse," should be encouraged and fully integrated into ISO-NE operations.

The PUC also called on large consumers to join NEPOOL to bolster its end-use membership sector.

"Clearly, [the Federal Energy Regulatory Commission] intended to facilitate more active representation of consumer interests in NEPOOL by ordering NEPOOL to restructure its voting rights to include an end-use sector." .

Access to Data. After being told once that data was commercially sensitive and private, the Oregon PUC and the Oregon Office of Energy petitioned the Western Systems Coordinating Council to reveal information on electric generation and distribution to help state regulators better understand recent upheavals in wholesale electric markets.

Distribution Systems. Connecticut regulators issued annual reports to the state General Assembly on electric distribution company system reliability for United Illuminating Co. and Connecticut Light & Power Co., using the System Average Interruption Duration Index (SAIDI) and the System Average Interruption Frequency Index (SAIFI). The indices are calculated both including and excluding major storms. .

 

Mergers & Acquisitions

PECO + Sithe. PECO Energy signed an agreement to purchase 49.9 percent of Sithe Energies' North American business for $682 million, with an option to purchase 100 percent of the company within two to five years at a price based on prevailing market conditions.

The purchase would include 3,800 MW of existing merchant generation, 2,500 MW under construction, and another 3,700 MW of generation in various stages of development, as well as Sithe's domestic marketing and development businesses.

FirstEnergy + GPU. FirstEnergy Corp. announced a merger agreement to acquire GPU Inc. for about $4.5 billion in cash and FirstEnergy common stock. FirstEnergy would assume some $7.4 billion in GPU's debt and preferred stock.

AGL + Va. Gas. Virginia regulators OK'd the sale of Virginia Natural Gas, a Dominion Resources subsidiary, to Atlanta-based AGL Resources-a sale that was required by the 1999 order approving the merger of Dominion Resources and Consolidated Natural Gas. .

Entergy + FPL. Entergy Corp. and FPL Group Inc. announced plans to merge and create one of the nation's largest electric utilities.



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