Law & Lawyers

With the end of monopoly in electric generation, utilities can assure savings by taking a creative approach to state and local taxation.

Deregulation of electric generation will force electric utilities to examine closely their state and local tax burden. Under deregulation, most state and local taxes will not be part of a reimbursable rate structure. Rather, such costs will directly influence bottom-line profitability.

Local property taxes take a big bite out of electric generation profits. Coal suppliers of utilities pay significant local taxes.

Professor Shepherd sees selective price cutting as anti-competitive, but even a monopolist should be allowed to compete on price.

As the electric industry deregulates, state public utility commissions are asked increasingly to allow the local utility to offer price discounts to large-load customers who might otherwise turn to other sellers. So far, nearly all the PUCs faced with this issue have agreed that such discounts are beneficial: They help retain large-load customers, who help pay the utility's fixed costs.

I am writing to express my concern over the Feb. 1 publication of the article, "Why Applicants Should Use Computer Simulation Models to Comply With FERC's New Merger Policy" (p. 22). The authors, Mark W. Frankena and John R. Morris, have used the editorial pages of PUBLIC UTILITIES FORTNIGHTLY to deliver a highly commercial message promoting their preferred computer model at the expense of several other software packages, which they specifically name.

A simple formula method shows utilities exactly how much to discount prices. Electric utilities have drawn attention recently (and criticism from some quarters) for granting off-the-tariff discounts to customers deemed at risk for migration to lower-priced competitive alternatives. Typically, utilities have offered discounts to high-load customers in exchange for a long-term purchase commitment providing either more certain earnings, higher expected earnings, or both.