Pacific Northwest

Do mergers and "critical mass" really make a difference? The answer, it seems, is yes.

To become more competitive, U.S. electric utilities have embarked on a quest in recent years to improve operational efficiency and factor productivity. The question is: Are utilities making progress? And, which companies have gained a competitive edge? Which have not?

Industry analysts have long argued that given the structure of the markets they serve and their cost-based, rate-setting procedures, electric utilities tend toward monopolistic behavior.

Nine Southwestern electric utilities are investigating the feasibility of establishing a regional independent system operator.

The Desert Southeastern Transmission and Reliability Operator (Desert STAR) would be the name of the new ISO. Initial members would include: Arizona Electric Power Co-op; Arizona Public Service Co., El Paso Electric Co., Nevada Power Co., Public Service Co. of New Mexico, Salt River Project, Texas-New Mexico Power Co., Tucson Electric Power Co., and the Western Area Power Administration's Desert Southwest Region.

Robert Blohm and Professor William Hogan recently traded op-ed letters in the Wall Street Journal on the "poolco" and "bilateral" models for wholesale power markets:

Writing first, Blohm (an advisor to Ontario's Macdonald Committee on electric competition) praised bilateral trading (individual buyers and sellers agree on price).

Sound bites from state and federal regulators.

Coal Tar Cleanup. Minnesota court affirms ruling by state regulators requiring Interstate Power Co.'s natural gas customers to contribute to costs for cleaning up the company's manufactured gas plants, since the plants were "used and useful" when the pollution occurred (though the wastes were not deemed hazardous until 1980). No. C1096-1558, Feb. 18, 1997 (Minn.Ct.App.).

AT&T's New Market. Washington allows AT&T Communications of the Pacific Northwest Inc.

Prospects look good for cheaper, independent electrical power in Ontario. The market is forcing an end to the current impasse on energy policy. Reforms are apt to include "wholesale access," which should arrive in the province before the year is out. Otherwise, Ontario may lose jobs to neighboring provinces and states.

Flow-based pricing ends

subsidies inherent in grid-wide,

postage-stamp rates.

I

n Order 888, the Federal Energy Regulatory Commission suggested 11 principles for forming an independent system operator, or ISO. In its third principle, the FERC offered this guidance on transmission pricing:

An ISO should provide open access to the transmission system and all services under its control at non-pancaked rates pursuant to a single, unbundled, grid-wide tariff that applies to all eligible users in a non-discriminatory manner.

Bonneville Power "Subscriptions" Seen Among Sticky Issues

A panel of governors in the Pacific Northwest expects to issue a plan this month that proposes a restructured Bonneville Power Administration, primed for the regional free-market electric economy.

The panel would act on a steering committee report that resolved pressing energy matters in the Northwest. But the committee report left open other issues that some say could leave the BPA's future in doubt.

But which one?

And how to adjust for different delivery points?FOR THE PAST 20 YEARS, THE WESTERN

Systems Coordinating Council (WSCC) has built a reputation for innovation in electric markets.

Marriage of convenience eyes retail market.

By Richard S. Green and J. Michael Parish

Enron's proposed entry into the electric energy business is a "wake-up call." Open competition will continue to accelerate, and new, aggressive players will seek ways to become involved as the energy and energy services businesses converge.

A combined Enron/Portland General Corp.

Converging Markets:

The First REAL Electric/Gas MergerEnron's bid

to acquire Portland General heralds a new phase

in utility competition.

Why the Holding Company Act doesn't matter.

By Charles M. Studness

The merger agreement between Enron and Portland General Corp. has reshuffled the electric restructuring deck. It makes electric utilities takeover targets for outside suitors after 60 years of peaceful immunity.