Fortnightly Magazine - October 1 1995

Moody's Frowns at Stranded Costs

A recent report by Moody's Investors Service, Stranded Costs Will Threaten Credit Quality of U.S. Electrics, estimates total stranded costs for

investor-owned electrics at $50 to $300 billion, depending on market-price assumptions. The most likely scenario would produce about $135 billion in stranded costs, compared to present total industry equity of about $165 billion and total assets of $570 billion.

Conn. Updates Gas Regulation

The Connecticut Department of Public Utility Control (DPUC) has adopted new cost-of-service guidelines allowing natural gas local distribution companies (LDCs) to develop unbundled rate structures, including cost-based firm transportation rates. The DPUC also issued suggestions for refining existing supply and demand forecasting methods. According to the DPUC, current cost-of-service studies did not adequately address interclass subsidies at existing rate levels.

Perspective

For almost a decade now, the Federal Energy Regulatory Commission (FERC) has pursued the goal of promoting competition in bulk-power markets, focusing on access to transmission as its primary tool to achieve that end. This trend first emerged in the 1987 PacifiCorp merger case. It gained momentum with the strong message sent by the Congress in the Energy Policy Act of 1992 (EPAct).

Fla. Updates Water ROEs

In a preliminary ruling, the Florida Public Service Commission (PSC) has proposed several changes to its rules for setting a generic rate of return on common equity (ROE) for water utilities. The proposed leverage formula produces a suggested ROE range of 10.18 to 11.88 percent, based on an equity ratio of 40 percent. The change represents an increase of 55 basis points over the midpoint indicated by the existing formula. According to the PSC, the update incorporates changes in underlying market conditions, including bond yields and required rates of return.

Gas Wary of Electric IRP/DSM

The American Gas Association (A.G.A.) has issued A Strategic Guide to IRP and DSM for Natural Gas Companies, prepared by Hampton Strategies, Inc. Because the evolution of IRP and DSM initiatives for electric and gas companies will be greatly affected by increased competition, the report contends, natural gas companies need to be familiar with issues and practices surrounding DSM cost recovery and profitability incentives.

Montana and Iowa Reject EPAct Section 115

The Montana Public Service Commission (PSC) has decided not to adopt federal standards for natural gas integrated resource planning (IRP) and demand-side management (DSM) contained in section 115 of the Energy Policy Act of 1992 (EPAct), concluding that current information did not support establishing formal standards in those areas. The PSC explained that the expected costs of future commission involvement in the matter outweigh the benefits that might reasonably be expected at this time. Re Section 115, Energy Policy Act of 1992, Order No. 5861, Docket No. 94.9.42, Aug.

Collision or Coexistence: The FERC, the CPUC, and Electric Restructuring

Will the Crown accept the olive branch offered by its colony, or will conflict ensue? That was the question posed on July 13 by Thomas Page, CEO of San Diego Gas and Electric Co., at the "Western States Workshop on California Restructuring," the first industrywide meeting to discuss the policy proposals issued six weeks before by the California Public Utilities Commission (CPUC).The Crown sent its emissaries.

Nuke Economics Improving

A recent Nuclear Energy Institute (NEI) report, Sharpening the Competitive Edge, finds that, by focusing on improved economic performance and undertaking a range of individual and industry initiatives, utilities reduced nuclear plant operating and maintenance (O&M) expenses by 8 percent between 1994 and 1995.

Off Peak

"Througout much of the

history of generation, technology

devolved at a very slow pace after

the construction of the first generation

of large central generation stations. With

the development of nuclear energy in the

1940s and 1950s, the government promoted an

alternative energy source that was expected to

provide a cheap source of power as well as

provide a source of plutonium for nuclear

weapons development.

Aggregating Municipal Loads: The Future is Today

The debate today in many state capitals is whether electric restructuring will help or hurt the residential and small commercial customer.

Proponents of wholesale and retail wheeling foresee a positive result. They claim that residential and small commercial electric consumers stand to gain as much from competition in electric generation as do large industrial customers with high load factors.

V