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Fortnightly Magazine - November 2006

LNG as Price Taker

And its impact on power generation.

While oil and gas prices now are falling after the latest experience with fuel-price volatility, the Global Energy Decision fuels team is focused on modeling an integrated world-wide system of fuel relationships encompassing crude oil, natural gas, coal, and increasingly, synfuels to help our clients assess the implications of fuel-price swings on their businesses. Let’s look at the potential impacts and implications of this growing reliance on liquefied natural gas for North America’s power-generation demand.

Byline: 

Michael Donnelly, Ph.D.

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Miles to Go

Progress has been made, but much work remains along the path to ERO completion.

FERC demonstrated strong leadership in meeting the aggressive timeline set by Congress for establishing the regulatory basis on which the Electric Reliability Organization will be created. But next summer’s peak-demand season is fast approaching. And much more work remains ahead for the industry to finish the job.

Byline: 

James Fama

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The Next Level of E-Procurement

Utilities must embrace supply chains that include planning, inventory optimization, and logistics.

The procurement and supply-chain functions of today’s utility are the Rodney Dangerfield of the utility cost-cutting paradigm: They don’t get any respect. Supply chains in most industries extend beyond sourcing and e-procurement to include planning, inventory optimization, and logistics. When linked together with technology, this creates an “integrated supply chain” that provides visibility from customer to utility to vendors/strategic alliances, generating great value for the company.

Byline: 

Laura Powell

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The Weather in the Details

Why have utilities lost millions of dollars on weather-normalization plans? Blame deprecated NOAA calculations.

NOAA’s measure of heating degree-days between a normal 30-year period and a given test year is consequently too high by 77 degrees when compared with the more accurate hourly estimates for the 30-year period and for the test year. In this case, a hypothetical Northwest utility would see a revenue shortfall of between $2 million and $5 million.

Byline: 

Jeffrey A. Dubin and Villamor Gamponia

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How Needed Is NERC?

Critics say its new budget and business plan could simply duplicate the work of RTOs.

FERC granted formal certification to NERC as the nation’s sole ERO and reliability czar, making it inevitable that NERC would delegate the job of regional enforcement to its various regional reliability councils, already constituted. To understand why FERC acted as it did, turn back the clock nearly a decade.

Byline: 

Bruce W. Radford

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Regulators Forum: Taming the Utility Frontier

Policymakers are setting sights on new challenges facing utilities.

Utilities in the United States are heading into uncharted territories, and the regulatory landscape is changing accordingly. To learn what it takes to tame this new territory, we spoke with three FERC commissioners, a state regulator, and a Western governor.

Byline: 

Michael T. Burr

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Return On Equity: Regulators Trust, but Verify

Some recent utility rate proceedings cast doubt on new ROE models and “risk adders.”

(November 2006) Our annual return on equity (ROE) survey broadly shows a continuing decline in the level of debate over issues specific to restructuring of the electric market. It also reveals a subtle shift back to investor requirements and overall business risks faced by regulated companies.

Byline: 

Phillip S. Cross

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Power Procurement: What's in Your Mix?

Why competitive markets are scaring regulators.

If the underlying wholesale electricity markets from which supplies are procured are competitive, then the remaining concerns regarding price levels and volatility can be addressed through regulatory policies.

Byline: 

Joseph Cavicchi and Andrew Lemon

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The Fallacy of High Prices

We are better off under restructured electric markets.

The most important action regulators can take to minimize consumer electricity costs is, and will continue to be, ensuring competitive wholesale markets, while demanding a rich mixture of products from the suppliers in these markets.

Byline: 

Howard J. Axelrod, Ph.D., David W. DeRamus, Ph.D., and Collin Cain, M.Sc.

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Demystifying Intelligent Networks

Why the next wave of transformation is already upon us.

The electricity system in the United States received renewed attention after the August 2003 blackout that affected more than 50 million customers across the Northeast United States and caused billions of dollars of damage to the U.S. economy. This blackout became a call to action as the event exposed the United States’ dependency on a vulnerable infrastructure. The intelligent network is one of the results of that call to action.

Byline: 

Mani Vadari, Ph.D

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