IOUs

"It could have been worse."

"It says to the market, `It won't be so bad.' It will take longer now, so that's better for the utilities."

"It creates a new bureaucratic entity that will make regulatory choices."

"It's regulated deregulation. It's alarming if that's the prototype for the nation."

That's the word, respectively, from Barry Abramson at Prudential Securities, Edward J. Tirello, Jr. of NatWest Securities, Steven Fetter at Fitch Investors Service, and Dan Scotto of Bear Stearns.

The Federal Energy Regulatory Commission (FERC) Mega-NOPR1 covers four topics:

1) The FERC's jurisdictional powers to implement wholesale open access

2) The FERC's proposal for electric utilities to recover "legitimate and verifiable stranded costs" from departing wholesale customers (a small fraction of all stranded investment), and its belief that states should ensure recovery on retail bypass (the much larger share)

3) A range of measures to implement

In talking to electric utility managers from across the country we have found that most believe direct access will have major repercussions on all aspects of their business by the end of the decade. Not surprisingly, there is an emerging consensus that revenues will drop rapidly as supply options grow for retail customers.

The Federal Energy Regulatory Commission (FERC) set in motion a new round of restructuring for the U.S. electric power industry when it issued its latest Notice of Proposed Rulemaking (NOPR).

Appliance Disservice

Gordon Canning's article, "Entering the Appliance Repair Business" (Feb. 1, 1995), contains several inaccuracies. First, Mr. Canning asserts that "the residential customer views the utility as a preferred provider." This is not a universal given. Residential customers only view a utility as a preferred provider of appliance service if the utility is allowed to engage in nonutility business activities and to subsidize these services below fair-market value.

Fitch Investors Service has assigned competitive rankings to 60 of the nation's largest public power and investor-owned electric utilities (IOUs). The top three IOU slots in the Fitch Competitive Indicator (FCI) go to Duke Power Co., Potomac Edison Co., and Northern States Power Co.

This fight is for the heart and soul of regulation everywhere. The Federal Energy Regulatory Commission (FERC) won the first round on February 22, but I think there's more to come.

The fight involves incentives for nonutility generators (NUGs). It also touches on PURPA (em the Public Utility Regulatory Policies Act of 1978 (em which guarantees a market to cogenerators or power producers (QFs) who qualify. But more important, this battle involves regulatory philosophy.

After 40 years of wandering in the wilderness as a minority party, House Republicans are ready to slash and burn what they see as a bloated federal bureaucracy. The next two years will demonstrate just how powerful the legislative branch can be when both House and Senate are controlled by a strong-willed party on a mission. Electric industry officials seem optimistic, but cautious, about this Republican revolution.

Eugene P. Coyle works as an energy analyst for Toward Utility Rate Normalization (TURN), a consumer advocacy group in California that claims 30,000 members.

t t t t t

The January mini-forum failed to discuss a key underlying assumption made by PoolCo proponents. The assumption is that price competition will really exist in tomorrow's wholesale electric market.

Merger planning is touchy business. In a hotel crowded with utility executives gathered together to talk mergers, you notice everything: Who's there and who isn't. Who's talking to whom. Who came with his lawyers. And who's always out in the hall on the phone.

That's why I had so much fun last month at the Eighth Annual Utility M&A Symposium, sponsored by EXNET (Public Utilities Reports and The Management Exchange).