Stranded-
Cost
Recovery: All FERC'ed Up
By Michael T. Maloney, Robert E.
McCormick, and Chad A. McGowan
The "lost-revenues" approach in Order 888 ignores the fact that cash flow drives
asset valuation . . .
. . . the key to measuring uneconomic investment.
The California legislature had taken an interest in electric restructuring from early on in the debate. Through policy committees of the Assembly and Senate, it had signaled that the CPUC would need the blessing of the lawmakers before it would be allowed to pursue the ideas spelled out in the commission's Final Policy Decision. Moreover, the December 1995 decision had drawn a divided reaction. Some parties had sought relief from the outcome of the December 1995 order.
After reviewing an application by National Fuel Gas Distribution Corp., a local distribution company (LDC), to increase its purchased-gas cost rate, the Pennsylvania Public Utility Commission (PUC) has ordered the LDC to credit its sales customers with revenues collected from the transportation class as penalties for exceeding the current 10-percent limit on delivery imbalances. The PUC explained that costs for storage capacity due to overdeliveries by transportation users should be paid for by the class of customers responsible for such costs.
The New York Public Service Commission (PSC) has granted a series of waivers from its existing ban against the submetering of gas service to commercial and industrial (C&I) customers in the state. The waivers will allow GCT Venture, Ltd. to submeter gas service to approximately 25 food vendors renting facilities and space within the real estate firm's proposed redevelopment of the grand Central terminal in New York City.
The PSC observed that gas submetering was prohibited because of safety considerations, especially in cases of residential service.
A settlement agreement approved by the New York Public Service Commission (PSC) for National Fuel Gas Distribution Corp. "would attempt to institute" a gas transportation program on behalf of low-income residential gas users.
The agreement also allows the utility to increase its rates by 2.2 percent in equal increments over a two-year period and provides for an equal sharing between the company and its ratepayers of earnings in excess of a 12-percent return on common equity.
The Oregon Public Utility Commission has authorized Portland General Electric Co. to expand market-based (discounted) pricing options for commercial and industrial (C&I) customers, by lowering the minimum load threshold from 10 to 5 megawatts.
Pricing under the new tariff is based on either 1) an annual fixed-price quote set at the beginning of the contract year and reflecting the market price of power delivery to the utility's service territory; or 2) the daily nonfirm price at the California-Oregon Border, plus 1 mill per kilowatt-hour.
The Arizona Corporation Commission has extended its interim approval of the "Interstate Pipeline Capacity Sharing Program" implemented by Southwest Gas Corp.
The plan allows the gas utility to buy gas on the spot market from areas outside the area served by its traditional pipeline supplier, El Paso Natural Gas Co., and then transport the gas using pipeline capacity held by El Paso's other operating divisions in Nevada and California. The utility then credits the contributing pipeline division with one-half of the commodity-cost savings as compensation.
About a year ago I stuck my neck out to predict that electric utilities might end up with stranded investment in transmission lines. I suggested that financial commodities trading-longs, shorts, and hedges-might supplant physical product movements. It's happened in natural gas, where the interstate pipelines have suffered from "decontracting" and capacity "turnback"-a phenomenon that has tended to move from West to East.
The California Public Utilities Commission (CPUC) has denied a request by a large noncore gas user for a waiver from eligibility limits imposed under a real-time pricing (RTP) experiment for gas transportation service approved by the CPUC in 1994 for San Diego Gas and Electric Co. (SDG&E).
In an earlier ruling, the CPUC had restricted eligibility for the RTP experiment to a maximum of 10 customers per year, and had excluded electric generation and cogeneration customers from eligibility.
The Michigan Public Service Commission (PSC) has approved a request by Detroit Edison Co., to offer a special discount contract to one of its large industrial customers, MasoTech, Inc. The customer had failed in an earlier attempt to compel the utility to offer transmission service so that it could gain "direct access" to other sources of electric power. See, Re MasoTech Forming Technologies, Inc., 168 PUR4th 142 (Mich.P.S.C.1996).