Fortnightly Magazine - November 15 1995
Government agencies sometimes condemn privately owned operating utilities for their own use. Water companies, landfills, hydroelectric plants, and transportation lines are examples.
But these cases pose a problem: How to measure "just compensation," especially when regulators set the rates charged (and profits earned) by a privately owned utility at artificially low levels, even when the commodity is scarce and the need for the service high.
Baltimore Gas and Electric Co. (BG&E) on September 25 announced that it would acquire Potomac Electric Power Co. (PEPCO) for $2.9 billion, creating an as-yet unnamed company with assets exceeding $15 billion, and annual revenues of about $5 billion. The new company will be one of the 10 largest electric utilities in the nation, with 1.8 million electric customers and 530,000 natural gas customers.
BG&E shareholders will receive one share of stock in the new utility for each share of common stock. PEPCO stockholders will receive .997 share for each share.
While approving a $58.8-million annual rate increase for Puget Sound Power & Light Co., the Washington Utilities and Transportation Commission (UTC) has also agreed to terminate its experimental periodic rate adjustment mechanism (PRAM).
Central Illinois Light Co. (CIL) has asked the Illinois Public Utilities Commission to approve two retail wheeling pilot programs named 'Power Quest.' One is aimed at industrial customers, the other at commercial/residential customers, although participation is strictly voluntary.Customers participating in Power Quest will purchase their electricity from sources other than CIL, and then contract with CIL to deliver the power through existing lines. The customer will pay the supplier for the energy and CIL for the delivery.
The Missouri Public Service Commission (PSC) has approved an experimental alternative regulation plan for Union Electric Co., the largest regulated electric utility in the state. The new plan is part of a stipulation and agreement that includes a $30-million one-time customer refund and a $30-million annual rate reduction. The experiment (em scheduled to run between July 1, 1995, and June 30, 1998 (em involves a sharing of company earnings between ratepayers and shareholders.
Montana Power Co. (MP) has asked the Montana Public Service Commission (PSC) for a $34.9-million (9.84 percent) electric rate hike, and a $12-million (10.45 percent) natural gas hike. It also offered a preferred alternative electric and gas rate plan.The alternative plan would serve as a transition mechanism to a more competitive environment, limiting additional rate filings through 1998 and reducing this year's request by $14 million for electric and $3.5 million for natural gas.
The North Dakota Public Service Commission (PSC) has decided to consider different types of regulation for electric utilities and has issued a set of criteria to guide interested parties in formulating specific proposals for experimental programs. In a separate statement, however, Commissioner Leo M. Reinbold warned against making too much of the decision.
All proposals must promote increased utility efficiency and flexibility in meeting customer needs while allowing customers and shareholders to share in any benefits.
Idaho Power (IP) has filed a notice of settlement with the Idaho Public Utilities Commission (PUC), its first step toward gaining approval to accelerate amortization of accumulated deferred investment tax credits (ADITC) when year-end return on equity (ROE) falls below 11.5 percent. If the PUC agrees, the agreement would remain in effect from 1995 through 1999.
The Michigan Public Service Commission (PSC) has approved a price-cap electric regulation plan for Edison Sault Electric Co. Edison will cap base rates at existing levels, roll its existing power-supply cost-recovery (PSCR) factor into base rates, and suspend the PSCR clause prospectively. The utility will then be authorized to change initial rates upon 30 days' written notice to the PSC, as long as the altered rates for each class do not exceed initial rates.