Benefits

DEREGULATION PRESENTS WHAT IS PERHAPS THE BEST opportunity yet for renewables to stake a lasting claim in the electricity market.

Since most energy from renewable sources still isn't priced competitively with fossil-fueled technologies, many restructuring proposals at state and federal levels include various support mechanisms intended to drive down the renewable generation costs. The initial added expense is a necessary trade-off, advocates say, for the resulting reductions in emissions and energy price volatility.

TELCO UNIVERSAL SERVICE FUND. Reversing an appeals court, the Kansas Supreme Court upheld a decision by the Kansas Corporation Commission that had required wireless telecommunications carriers to contribute to the state's universal service fund. It also affirmed a KCC ruling setting the initial amount of the fund in a roundabout way based on equalizing inter- and intrastate long-distance rates.

The KCC order (issued Dec. 27, 1996) had slashed intrastate toll rates by $111 million over three years. It then cut access charges by an equal amount to offset the loss to toll carriers.

Federal Agencies

ELECTRIC RETAIL PRICES. The Energy Information Administration has released a new report finding that the average retail price of electricity has declined for the third year in a row and remained stable for the first nine months of 1997. According to Electric Sales and Revenue 1996, average residential electric prices declined slightly in 1996, the first drop for that consumer class since the EIA began collecting data in 1984.

As the U.S. electric power industry unbundles, the industry and its regulators grapple with two big questions concerning the degree to which distribution services should be unbundled. First, what groups of distribution activities can separate suppliers provide? Second, which of these groups of activities should be open to competition?

Looking at the unbundling experiences of Argentina, Australia, Canada, Chile, Norway and the United Kingdom sheds light on these questions. The distribution unbundling of the U.S. gas and telecommunications industries provides additional insights.

THE RECENT INCREASE IN MERGER ACTIVITY IN THE energy and telecommunications industries has concerned state regulators for some time. Such concern reveals how the practical or "local" aspects of business deals often clash with broader national issues reviewed by federal authorities in merger cases.

In electric utility mergers, for instance, the Federal Energy Regulatory Commission will address effects on competition, rates and regulation.

WHETHER YOU CALL IT "DEREGULATION" OR "re-regulation," the promised move to competition does not mean less regulation - at least not any time soon.

UNDER RETAIL COMPETITION, AT LEAST SOME electricity customers will make purchase decisions out of concern for the environment. A variety of utility green pricing programs already target environmentally concerned consumers. Recent experience in Massachusetts and New Hampshire confirms that utilities and power marketers are gearing up for full-fledged green power marketing to differentiate their products in a competitive environment.

With benefits unclear, PUCs will "go slow."

California, New Hampshire, Massachusetts, Nevada, Pennsylvania, Rhode Island, and Vermont have given customers the right to choose their electric providers.

Other states are considering similar legislation.

In Congress, U.S. representatives Schaefer (R-Colo.), Markey (D-Mass.), DeLay (R-Tex.), and U.S. Sen. Bumpers (D-Ark.) and others have slapped bills on the table that would give choice to electric customers on a national scale.

Minnesota has lots of drafts, but no final plan.

So you think your state has been busy? In Minnesota, the 1997 legislative session saw more than a dozen new bills introduced on electric, gas and energy issues.

At the start of the session many expected that electric deregulation would play a major part in the legislative program. However, Gov. Carlson reports now that legislators will defer work on the issue until the 1998 session. Several electric industry deregulation bills were introduced at the end of the session, but when last we checked no hearings had been held.

Mr. Lindsay's March 1 letter (PUBLIC UTILITIES FORTNIGHTLY, p. 6) requires some further discussion. We do agree that reducing cooling seasonal peak electric demand is desirable. Lessening the electric infrastructure's environmental effects and electric system failures, as we witnessed in the summer of 1996, is to the public good. However, thermal storage systems have siting issues and the potential to run out of capacity at the worst possible time on peak days.