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Off Peak

Top utility executives are winning pay hikes these days, but only at the cost of risky stock options that put a premium on company performance.

"Higher overall pay levels, and especially the increased use of long-term incentive plans, point to the trend in the utility industry toward heightened risk-and-reward pay strategies," according to Executive Compensation in the Utility Industry, a recently released report compiled by William M. Mercer Inc.

The use of at-risk pay incentives becomes even more pronounced as the size of the utility increases.

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Anti-Competitive Impacts of Secret Strategic Pricing in the Electricity Industry

Flexible prices make markets hum,

but discounts discriminate when monopolies rule.

Many expect that the electricity industry is moving inexorably toward a much-publicized "new competitive era." Companies, regulatory officials and experts all regard the momentum as powerful.

So far, the changes are just beginning, and there is a long way to go to reach fully effective competition. %n1%n Yet even at this early stage, the merger and pricing strategies adopted by the established electric firms may be threatening the prospects for competition.

Byline: 
William G. Shepherd
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Performance-Based Plan Withdrawn

Northern Illinois Gas "reluctantly" has

withdrawn its performance-based rate proposal from the Illinois commission. Under the proposal, NIG would have compared its total annual gas supply costs against a market-based benchmark, and the difference would have been shared between NIG and its customers. Presently, natural gas supply costs are recovered directly from customers without mark-up.

NIG had filed its proposal in response to an amendment to the Illinois Public Utilities Act authorizing the commission to approve performance-based rates on an experimental basis.

Byline: 
Lori A. Burkhart
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Legislative Hot Spots: From Texas to Ohio, New Jersey to Minnesota, Electric Restructuring Games Begin

Perhaps the only political prediction bound to come true this year is that the words ôelectric restructuringö will reverberate in nearly every stateÆs legislative chamber.

So says Matthew Brown, director of the energy project at the National Conference of State Legislatures.

But other factors support BrownÆs prediction. Public Utilities FortnightlyÆs informal survey of most states turned up similar results. Legislators know that the Clinton Administration and the U.S. Congress plan to introduce a federal bill this year.

Byline: 
Joseph F. Schuler, Jr.
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Georgia To Open Gas Markets

The opening of the Georgia General Assembly on Jan. 13 prompted the Georgia Public Service Commission to push for competition in the state's natural gas industry. Following a December report by the Georgia House and Senate Gas Study Committees, legislation is expected this session to open up the gas market.

That report, in effect, rejected a proposal by Atlanta Gas Light Co. to enact competition. Now AGL has a new proposal, which would transform it into a "pipes" company that no longer would sell gas to end users.

Byline: 
Lori A. Burkhart
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Power Pool Politics: How New England Agreed to an ISO

With its membership opened, NEPOOL sets a transmission tariff, but still must develop competitive markets. In 1993, after a series of attempts going back as far as 1971, the New England Power Pool failed to reach agreement among its members for a regional transmission arrangement. But destiny then took over (em with help from the newly enacted Energy Policy Act (em to lead pool members back to the bargaining table. Finally, on Sept. 30, 1996, NEPOOL announced that its executive committee had agreed in principle on restructuring the pool.

Byline: 
Gordon L. Weil
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Trends

Competitive Power Markets

Put Capacity at Risk

Generation markets in the U.S. are about to go through a period of radical transformation as full competition is introduced to the industry. One of the largest impacts of this transformation will be the creation of a more efficient generation industry. According to a new study by Resource Data International, the drive towards increased efficiency will result in the premature shutdown of some high-cost, inefficient power plants.

Our analysis starts by analyzing the costs of every utility owned power plant in the country.

Byline: 
Kent Knutson and Chris Seiple
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ISO Pricing: Let's Not Socialize Transmission Rates

Flow-based pricing ends

subsidies inherent in grid-wide,

postage-stamp rates.

I

n Order 888, the Federal Energy Regulatory Commission suggested 11 principles for forming an independent system operator, or ISO. In its third principle, the FERC offered this guidance on transmission pricing:

An ISO should provide open access to the transmission system and all services under its control at non-pancaked rates pursuant to a single, unbundled, grid-wide tariff that applies to all eligible users in a non-discriminatory manner.

Byline: 
Mark J. Vople
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Perspective

My business, the natural gas industry, stands at a crossroads. Unbundling and deregulation permeate the market. The next three years will see the end of many fixed, long-term supply and transportation service contracts (em the closing of an era.

In fact, natural gas marks perhaps the last commodity traded on a major exchange that remains captive to such long-term contracts. The demise of such contracts will add flexibility to gas pricing and supply management.

This evolution will accelerate with a host of changes in the way gas moves in wholesale markets.

Byline: 
James P. Healy
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State Roundup - Electric Competition Moves On

Electric Competition Moves On

The recent months have brought a flurry of activity in a number of states:

ARIZONA: The Arizona Corporation Commission approved rules opening Arizona's electric industry to competition over a four-year period starting in 1999. The rules allow retail customers to retain standard electric service, or to choose competitive services.

Beginning Jan. 1, 1999, utilities must make available 20 percent of its peak 1995 demand to all customers, including small business and residential.

Byline: 
Lori A. Burkhart
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