Commission

WHY IS ELECTRICITY COMPETITION NOT WORKING? The principal reason is the failure of Order 888 to accommodate the economic and technological constraints of wholesale power markets.

Soon after Congress passed the Energy Policy Act of 1992, to give authority to the Federal Energy Regulatory Commission to compel electric utilities under its jurisdiction to wheel power for others, the FERC correctly recognized that piecemeal wheeling orders wouldn't work well without a tariff. A tariff would make the service quickly available to the user without the need for time-consuming negotiation.

A FREQUENTLY ASKED QUESTION UNDER CALIFORNIA's NEW electricity framework is, "Where have all the suppliers gone?" At a recent industry symposium, one large customer noted during negotiations with competitive energy suppliers that all five finalists had disappeared. The experience at my firm has been so draconian, but I have found that it is not unusual for half of the finalists to disappear in the bargaining. And when I say "disappear," I'm talking about something more extreme than simply reaching an irreconcilable difference.

WHEN 42 PUBLIC UTILITY COMMISSIONERS HUDDLED in private recently at the Brown Palace Hotel in Denver to discuss their roles come 2003, they came to a striking conclusion: Someday they might be out of business. Some said it would take five years, others said as long as 10.

"There was quite a bit of discussion and interest in commissions actually formulating what they call an 'exit plan,' by which they meant, in a kind of systematic way ... being prepared to wind back on their regulatory oversight," says Douglas N.

THERE'S A STORM coming. This tempest threatens to inundate management and shred shareholder value. It can't be avoided, only survived. Only those who batten down the hatches will survive.

The issue is nuclear plant decommissioning. While many would prefer to comfort themselves that the dark clouds on the horizon are still far off, trouble may come sooner than they think.

Of the 106 operating plants in the United States, more than half were licensed before 1978. Of the plants that have shut down so far, not one has reached the expiration of its license period.

TELEPHONE BILLING PRACTICES. Citing the filed-rate doctrine, which bars deviation from published tariffs, a federal appeals court affirmed the dismissal of two class action suits against AT&T Corp. that sought damages for alleged fraud. The suite arose from AT&T's failure to disclose to its residential long-distance telecommunications customers its practice of rounding charges up to the higher full minute.

THE ROAD TO RETAIL COMPETITION IS A LONG ONE. HAVING realized that, utility management has quelled its initial panic and has begun to concentrate on longer-term objectives. For instance, how much market share am I likely to lose during competition's early stages? And what prices can I charge to various customer classes without incurring a loss in market share?

The answer could affect decisions about future load, asset divestiture and competitive strategies.

CROSS THE COUNTRY, CRITICISM RISES FROM INVESTOR-owned utilities as public power agencies are drawn into regional or national markets through power pools and the geographic expansion of power marketing activities. Whether these agencies are seen as federally funded or just indirectly subsidized, the complaints remain the same: tax advantages, no reciprocity, exemptions from regulation.

Who really has power over the power? Do public power agencies enjoy an advantage, as private industry claims?

DEREGULATION OF ANY INDUSTRY OFTEN LEADS TO consolidation and merger, which frequently bolsters the involved companies' stock prices.

In the SBC/Pacific Telesis merger, intervenors argued before the California Public Utilities Commission that the change in the value of Pacific Telesis' stock was a measure of the merger's "benefits" to shareholders. They said the PUC should force the merged company to rebate half those benefits to ratepayers.

Analysts use stock market information in an "event study" to measure the economic impact of a particular event.

THE RUSSIAN FEDERATION WANTS U.S. UTILITIES AND businesses to know investments are welcome and that processes soon will ensure the safety of American ventures there.

Nevertheless, it appears to favor traditional, American-style utility regulation, setting rates of return and limiting profits.

The Federal Energy Commission of the Russian Federation wants to create competition wherever possible, according to Andrey F. Zadernyuk, the first chairman of the year-old commission.

COMPETITIVE transition charges. Wires charges. Securitization payments. Every stranded cost recovery mechanism considered to date requires customers to pay for electric utility stranded costs through direct assessments on monthly bills. These charges will continue for many years after competition is introduced.

There is a real irony here: As we seek to introduce competition into the electric industry, we as regulators are forced to invoke all of the most heavy-handed tools to extract payments from citizens.