State Legislatures
CALIFORNIA ELECTRIC RESTRUCTURING. California Assemblywoman Diane Martinez, chairwoman of the Utilities and Commerce Committee, has introduced two new bills aimed at protecting consumers in a competitive market. But the measures already have been put on hold for this year. The first bill, AB 579, would cut rates for residential and small-volume commercial customers by 20 percent, rather than by 10 percent as promised in the state's restructuring act, AB 1890.
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.
Investor-owned utilities serving the Southeast U.S. are well-positioned to face increasing competition, but the region's municipal joint power agencies and electric co-ops may face serious losses.
That's the finding of a Moody's Investors Service regional study, the fourth in a series.
The "Southeast Electric Break-Even Analysis" estimates $24 billion in stranded costs for the region, with cooperatives and JPAs holding a disproportionately high portion of the per-kilowatt costs.
Competition abounds at wholesale, but retail is another story.
Will geography, politics and regional economics stand in the way of real choice for electric consumers at the retail level? Consider this tale of two power players.
One competitor, the Indiana Municipal Power Agency, is proud of itself. In its annual report, IMPA says that open access and competition in the wholesale market allowed it to trim wholesale rates for power it delivered to member distribution companies in 1996. "The results were remarkable," the report reads.
Moody's Investors Service examines key credit considerations in the evolving independent power production industry in a new report. The report predicts greater polarity in ratings of such companies.
The Haves and the Have-Nots: Access to Capital, Diversified Portfolios says the IPP industry will become dominated by "first-tier" companies that exhibit financial flexibility needed to survive in an increasingly uncertain environment. Such companies will possess diversified assets and ability to generate cash.
A new report from Moody's Investors Service finds that foreign investments often offer U.S. electric utility shareholders the prospect of higher returns, but hold little immediate upside benefits for bondholders.
The report, Some Investments Riskier Than Others in Wave of Overseas Expansion by U.S. Electric Utilities, finds that for bondholders, such investments detract from alternative uses of free cash flow. The bondholder could apply the invested money to debt service or repayment, or growing retained earnings to offset potential write-offs of stranded investment.
Moody's Investors Service has released a report that finds the most significant long-term implication of Order 888 for investors is for potential divestiture of transmission assets by investor-owned utilities.
The Moody's study, FERC Order 888 and Wholesale Competition: Catalyst for a New Market Model, also finds that divestiture by a vertically integrated utility may leave bondholders secured by a lien on relatively risky generating assets of often questionable market value, as opposed to the presently more diverse and balanced asset portfolio.
Allegheny Power System Inc. will merge with DQE Inc., parent company of Duquesne Light Co., to form Allegheny Energy, which will save both companies about $1 billion over the next 10 years.
The new company will have a total market capitalization of $10.6 billion: $6.2 billion in equity and $4.4 billion in net debt and preferred stock.
"Allegheny Power is a winter-peaking operation: Its low-cost, efficient operations and suburban and rural customer mix fit well with our summer-peaking operation and urban customer base," said David Marshall, President and CEO of DQE.
The Heritage Foundation has released its second report in a series on electric deregulation, aimed at capturing the attention of lawmakers on Capitol Hill now holding hearings on proposed legislation to restructure the electric industry.
The new report, Electricity Deregulation: Separating Fact From Fiction in the Debate Over Stranded Cost Recovery, by Adam D. Thierer, concludes that lavish stranded cost recovery is not justified, and that the "sky will not fall" if stranded cost recovery is limited or denied.
Moody's Investors Service has concluded that a properly structured securitization backed by the future cash flow from a utility's stranded investments can achieve a credit rating higher than the rating of the senior debt of the utility.
Moody's said this ability bodes well for the increasing number of investor-owned utilities expected to issue up to $75 billion of such securities by 2000 to recover uneconomic investments.