The Michigan Public Service Commission (PSC) has authorized Ameritech Michigan, a local exchange carrier (LEC), to restructure its rates to comply with a new state law forbidding LECs to charge less than the total-service, long-run incremental cost for each local exchange service offered. The LEC claimed that it began with basic services because prices for that segment of the market had been set artificially low for customers in rural areas of the state.

The Idaho Public Utilities Commission has authorized Intermountain Gas Co., a local distribution company (LDC), to implement a new interruptible-distribution transportation service for large-volume industrial customers, including a charge designed to minimize stranded costs associated with migration of customers from sales tariffs.

An advance peek at the Edison Electric Institute's 1995 Statistical Yearbook of the Electric Utility Industry reveals a general trend toward increase over last year's figures (see Table 1).

s Installed capacity totaled 749,723 megawatts (Mw), up 0.5 percent. Investor-owned utility (IOU) capacity alone rose 0.4 percent. And the South Atlantic division showed the largest increase: 1.6 percent.

s Generation totaled 2,994,529 gigawatt-hours (Gwh), up 2.9 percent. IOUs contributed 2,340,482 Gwh to this total, increasing its output 1.4 percent.

LEASING THE LOOP:

Telephone Service Resale in the Local ExchangeResellers want steep discounts, but local rates don't always cover costs. And reselling local lines provides little incentive

to upgrade the network.The Telecommunications Act of 1996 (Act) compels local exchange carriers (LECs) to sell telephone service to competitors (em who would then resell to the public at retail. Instead of constructing their own local distribution networks, competitors would buy local telephone service from the existing carrier at discounted rates.

By Michael H. Lee and William A. RosquistThe Vanishing LATA:

Pricing Chasms

and Clashing Markets

for Toll Service

Wide disparities can occur in toll rates within some states (em a legacy of multiple LATAs. Now, with

barriers falling, where will prices go?

With competition looming, electric utilities increasingly resort to price discounts, both to retain customers and to alleviate some of the pressure to introduce retail competition. Performance-based ratemaking (PBR), which allows utilities greater flexibility in offering price discounts, is emerging as an integral component of many restructuring proposals.

However, flexible pricing can create inequity among ratepayers.

Quizzed by lawmakers, and buffeted by political winds, regulators ponder an uncertain future.

Agree or not, utility commissioners are part judge, part regulator, and part politician.

Now that incumbent LECs must offer all services for resale, state regulators must decide the appropriate level of discount for the new resale tariffs.

Discounts could put incumbent LECs at a disadvantage, since many local exchanges already price below the cost of service, particularly for basic residential access.

Objective. Estimate market impacts of "1+" dialing parity plus eliminating traditional LATA boundary.

Model. Measure shifts in market dominance between major competitors, by assuming price changes and estimating revenue impacts across range of demand elasticities, to reflect both changed rates and market shares. Also consider changes to revenues collected by U S WEST through carrier access charge (CAC).

Scope. Limited to residential toll calls carried by AT&T and U S WEST. Does not examine commercial toll customers.

Data.

Flexible pricing schemes generally fall into four categories:

Load Retention Rates. Can prevent a customer from exiting system, either by relocating or choosing to self-generate. If retail competition is allowed, load retention rates can prevent customers from choosing a different generation company.

Economic Development Rates. May attract new customers to a service territory, or encourage existing customers to expand operations and boost demand. Differ from load retention rates by purporting to create jobs.

Flexible Rates (Flexrates).