Fortnightly Magazine - December 1995

SBT Settlement Gives Large Refunds

Oklahoma appears finally to have settled a 1992 Southwestern Bell Telephone (SBT) rate case, refunding customers about $438 million and cutting rates by $84.4 million annually. The settlement follows an FBI investigation and allegations of commission bias. The Oklahoma Supreme Court will formally approve the settlement once the many related, pending lawsuits are dismissed.

Virginia Tentative about Electric Restructuring

The Virginia State Corporation Commission (SCC) has initiated an investigation of electric industry restructuring and emerging competition. The SCC stressed that Virginia is not saddled with high-cost power, and that larger electric utilities in the state currently provide service at rates "significantly below" the national average. Nevertheless, the SCC concluded that a formal investigation was necessary to determine whether regulatory improvements might result in reliable service at lower costs for state consumers.

Industrials Force BPA Discount

Fifteen aluminum and chemical companies in the Northwest have joined together under the name "Direct Service Industries Inc." (DSI). Together, the 15 companies account for about 30 percent of BPA sales (3,000 megawatts (Mw)). Seven of them have forced the Bonneville Power Administration (BPA) to negotiate a cut-rate electric supply

contract, although the Federal Energy Regulatory Commission has yet to approve the new rates. These companies will now take 75 percent of their total requirements from BPA (about 1,300 Mw).

Fla. Examines Real-time Pricing Costs

The Florida Public Service Commission (PSC) has ruled that Gulf Power Co. may record a revenue shortfall associated with its experimental real-time pricing program "above the line" in determining current earnings under a rate agreement capping company profits at a 12.7-percent return on equity. The program permits Gulf Power to price services for large industrial customers to reflect lower costs associated with offpeak usage.

CAP Offers Plan to Cut LILCO Rates

The Citizens Advisory Panel (CAP) has released its proposal to cut rates on Long Island by 20 percent, in response to New York Gov. George Pataki's call for the dissolution of the Long Island Lighting Co. (LILCO). Electric rates on Long Island are the second-highest in the nation.

The CAP plan would slash at least $1 billion from Shoreham debt, and refinance the remaining debt with bonds issued by the Long Island Power Authority (LIPA). CAP believes the $1-billion cut alone would reduce electric bills 10 percent.

Maine Approves Electricity Price Hedging

The Maine Public Utilities Commission (PUC) has authorized Bangor Hydro-Electric Co. to enter into oil price-swap and price-cap transactions. The utility said that the since the PUC had eliminated its fuel adjustment clause in an earlier proceeding, it had sought ways to reduce the risk associated with fuel price changes. The oil "price hedges," seek to set Bangor's future cost of oil by requiring the parties to pay a settlement amount if the actual price, as published by a well-recognized source, should vary from the price contained in the agreement.

Columbia Gas Settles Class Action Suits

U.S. District Court Judge Joseph Farnan, Jr. on October 16 approved a $36.5-million settlement resolving class action lawsuits alleging securities laws violations against the bankrupt Columbia Gas System (CGS).The lawsuits were filed by various security holders against CGS, its independent public accountants, the underwriters of its 1990 stock offering, and certain officers and directors. CGS's portion of the settlement amounts to $16.5 million, with the remainder shared among the insurance carriers of various defendants.

Idaho Approves Sierra Pacific Merger

The Idaho Public Utilities Commission (PUC) has approved the merger of Washington Water Power Co. with Sierra Pacific Power Co. and its corporate parent, Sierra Pacific Resources. Pursuant to the terms of the merger agreement, the surviving entity will become Resources West Energy Corp., a Nevada corporation authorized to conduct business in Nevada, Washington, Oregon, California, and Idaho.The utilities estimate that the merger will save ratepayers $514 million over a 10-year period, with nearly half the savings attributable to reductions and alterations in workforce.

Consumers Power Locks Up GM

Consumers Power Co. has entered into long-term sales contracts with General Motors Corp. (GM) to supply all electricity for at least 10 years to 6 of GM's largest plants, and for at least 5 years for 13 of GM's other large facilities (total service of 450 megawatts).The facilities, which account for 65 percent of the utility's "at-risk" industrial electric load and 22 percent of its industrial load, will receive rate discounts in exchange for the long-term commitments.

Telecommunications -- Regulatory Update

State regulators continue to update methods of pricing telecommunications services, using price caps for local exchange carriers (LECs) while expanding existing pricing flexibility for interexchange carriers (IXCs). The emerging trend toward inviting competitors to serve the local market, including basic local exchange service, also continues. Some of the activity mirrors ongoing developments at the federal level, such as major regulatory reforms under debate in the Congress and court-supervised modifications to existing service restrictions stemming from the AT&T divestiture.