Commission

WHOLESALE POWER PRICES DURING THE SUMMER OF 1997 REACHED LEVELS MUCH higher than in 1996 - higher than the variable fuel costs of even the costliest units (see Figures 1 and 2). This situation has confounded many observers. Many thought, in spite of forecasts to the contrary, that markets would continue to exhibit excess capacity for years to come. They thought need for new capacity was distant and that hourly markets would not see premiums in excess of fuel costs for marginal units - the so-called "pure" capacity premium - for years to come.

The evidence is in.

BY WHAT AUTHORITY CAN STATES FAVOR RENEWABLE

energy in a restructured electricity market?

Renewable resource funding marks a major point of contention in utility deregulation. Environmental groups fear that without some form of compulsion or subsidy, or both, renewable resources will not survive in an energy economy based on least direct consumer cost. However, utilities do not want to be saddled alone with the chore of carrying all renewables to market.

The California Public Utilities Commission has approved an agreement that will resolve a multifaceted case concerning pricing of services and operation of intrastate natural gas pipeline facilities by Pacific Gas and Electric Co.

The agreement, known as the "Gas Accord," also initiated significant changes in the way PG&E operates its business by increasing competition and customer choice. To mitigate the effects of market power held by the company, the commission imposed a series of discounting restrictions on PG&E.

A cogeneration project approved by the Virginia State Corporation Commission will allow Virginia Electric and Power Co., the utility sponsor, to lease equipment to Chesapeake Paper Products Co., the project host (which will operate the gas-fired plant), and yet retain contractual rights to control certain aspects of operations and maintenance.

At the same time, however, the commission has nixed VEPCO's idea of organizing an affiliate "as an electric utility" to own and operate a pipeline lateral to supply natural gas to the plant.

Seeking to wrest control of public relations for electric competition from private "stakeholders," the California Public Utilities Commission has authorized the state's three largest investor-owned electric utilities (em Pacific Gas and Electric Co., San Diego Gas and Electric Co. and Southern California Edison Co. (em to spend $89.3 million for consumer education on electric restructuring, through mass media, mail, local outreach and a toll-free call center.

In a separate order, the PUC authorized PacifiCorp and Sierra Pacific Power Co.

The California Public Utilities Commission, citing restrictions that force electric utilities to buy and sell power through the state's power exchange, has rejected a request by Pacific Gas and Electric Co., to use energy-related financial derivatives (em futures, swaps and options, etc. (em to manage risk associated with volatility in gas and electric commodity markets.

According to the commission, the proposal by PG&E for blanket authority to employ derivatives would violate several aspects of its electric restructuring policy.

Commissioner William L. Massey said four issues would dominate the fall electric agenda of the Federal Energy Regulatory Commission: Orders 888 and 889 implementation, mergers, independent system operators and reliability.

Speaking on Sept. 11 at the PowerMart Power '97 conference and expo in Houston, Massey said the FERC hoped to issue a major order this fall on elements of California restructuring to ease implementation of the ISO and power exchange by Jan. 1, 1998.

Connecticut's Department of Public Utility Control and Attorney General Richard Blumenthal alleged gross mismanagement of the 582-megawatt Connecticut Yankee nuclear plant in charges filed at the Federal Energy Regulatory Commission. Northeast Utilities owns 49 percent of the facility.

The plant has been shut since December 1996 and is being dismantled. The filing claimed the utility lost control of contamination and created an undocumented nuclear waste dump.

CINERGY MERGER CONDITIONS. FERC allows two-year deferral of prior requirement (a condition of the 1993 Cinergy merger) for Cincinnati Gas & Electric Co. and PSI Energy Co. to build a 345-kV transmission line by 2000 to link territories to guarantee central dispatch for generation. Cinergy says it can now duplicate the capacity with open access. FERC Chair James Hoecker concurs, citing "further evidence that the bulk power market is working." (Docket No. EC93- 6-004, Sept. 24, 1997)

Hydro Licensing.

Pacific Gas and Electric Co.'s announcement that it wants to increase energy rates by almost $1.2 billion was met with outrage by consumer watchdog organization The Utility Reform Network.

Pacific Gas has notified the California Public Utilities Commission that it plans to file a 1999 general rate case to raise natural gas rates by $506 million to maintain gas pipeline safety and reliability. It also plans to increase electric base level rates by $703 million beginning Jan. 1, 1999 to improve service reliability.