LIPA

The Electric Competition Debate in...New York

HAS DISAGREEMENT BETWEEN STATE HOUSE AND COMmission stalled electric industry restructuring efforts in New York?

Sheldon Silver, speaker of the New York State Assembly, insists the Legislature is busy working on comprehensive restructuring legislation for the state. He has expressed dismay at efforts of the New York Public Service Commission, which is restructuring the industry utility by utility.

Silver believes legislation offers the best chance to introduce competition quickly and efficiently, rather than through multiple, individual restructuring plans.

News Digest

MICHIGAN CHOICE APPEAL. Michigan Attorney General Frank Kelley filed an appeal in the Michigan Court of Appeals of the Michigan PSC's Jan. 14 rehearing order (News Digest, March 15, 1998, p. 18) adopting a phase-in schedule for electric restructuring and retail choice for Consumers Energy and Detroit Edison. Kelley alleged that the order fails to create a competitive generation market or foster lower rates. He called it an "outrage," that gave the utilities everything they wanted. Case Nos. u-11290 et al., Feb. 13, 1998 (Mich.P.S.C.).

NEW HAMPSHIRE RESTRUCTURING. The U.S.

News Digest

CONSUMER FRAUD. The National Association of Attorneys

General, meeting Nov. 18 in Washington, D.C., to discuss electric restructuring, issued a warning to electric consumers on fraudulent schemes and abusive practices by scam artists. The warning encourages consumers to check their electric bills for unusual provider names or charges, and to avoid participating in contests that require a signature that can be used to switch an account.

RATE REDUCTION BONDS.

Inside Washington

USE OF U.S. ECONOMY UPHELD FOR EQUITY CALCULATIONS

The Federal Energy Regulatory Commission, in seven rate cases involving interstate natural gas pipelines, has upheld a new policy on the appropriate long-term growth rate to be used in computing their return on equity. Five of the pipelines contested FERC's new policy, as announced in Opinion 396-b.

The Commission defended the rate-setting method, but decided to allow the pipelines a chance to prove why the rules should not apply to them. The contesting pipelines are: Trailblazer Pipeline Co. (Docket No.

LIPA Takes Over LILCO

The Brooklyn Union Gas Co. and The Long Island Lighting Co. have agreed with the Long Island Power Authority for LIPA to acquire all of the Long Island Lighting Co.'s electric transmission and distribution system, plus substantially all of its regulatory assets and its share of the Nine Mile Point 2 nuclear plant.

The transaction would take place through a stock purchase from the holding company, which Brooklyn Union and Long Island Lighting Co. will form.

LILCO: The Ultimate Failure of Regulation

Nowhere are the failings of traditional utility regulation more evident than on Long Island. The New York Public Service Commission (PSC) has raised rates for the Long Island Lighting Co. (LILCO) 31 percent since 1989. Rates are now over twice the national average (em the highest in the continental United States. Meanwhile, Long Island's economy has been ravaged by defense cutbacks that have erased 100,000 jobs (em a 10-percent drop in employment.

Pataki Endorses LILCO Dismantlement

In response to a mandate by New York Gov. George E. Pataki, a Long Island Power Authority (LIPA) advisory team has developed a proposal to dismantle the Long Island Lighting Co. (LILCO), hoping to reduce electric rates by as much as 12 percent. In response, Moody's Investors Service has changed the direction of its review of LILCO's credit ratings from negative to uncertain.

LIPA intends to create a LIPA "wire company" that would buy LILCO's transmission and distribution assets, including some payment for the Shoreham plant.

CAP Offers Plan to Cut LILCO Rates

The Citizens Advisory Panel (CAP) has released its proposal to cut rates on Long Island by 20 percent, in response to New York Gov. George Pataki's call for the dissolution of the Long Island Lighting Co. (LILCO). Electric rates on Long Island are the second-highest in the nation.

The CAP plan would slash at least $1 billion from Shoreham debt, and refinance the remaining debt with bonds issued by the Long Island Power Authority (LIPA). CAP believes the $1-billion cut alone would reduce electric bills 10 percent.

N.Y.'s Pataki: Dissolve LILCO

New York Gov. George E. Pataki wants Long Island Lighting Co. (LILCO) dissolved to reduce electricity rates on Long Island. LILCO presently has the second-highest residential rates in the nation (Maui Electric Co.'s are highest) (em 16.8 cents per kilowatt-hour (›/Kwh), compared to the national average of just 8.8›/Kwh. Pataki has asked the Long Island Power Authority (LIPA) to draw up a plan that: 1) cuts rates in Nassau and Suffolk counties, 2) cuts rates by "double digits,"

3) protects Long Island residents from any property tax hikes, and 4) increases competition.

CMS Energy Reveals LILCO Role

CMS Energy Corp. has come clean as the "unnamed" potential investor in the plan announced in June by the Long Island Power Authority (LIPA) to acquire the Long Island Lighting Co. (LILCO).

CMS had not revealed its involvement in the proposed takeover before because its participation through a management services agreement is conditioned on the support of N.Y. Gov. Pataki. The company said it still is interested in providing the management services if the governor and other state officials decide a takeover is in the best interests of the citizens of Long Island.