Progress

It's not as straightforward as it seems, says an industry veteran.

No one can foresee with a high degree of certainty how electric energy markets will be structured over the long-term. The changes facing the electric energy industry may be as profound as those upheavals we've seen in the airline industry during the past two decades. In the "good old days," a flight from New York to Chicago had one price and an electric generating plant had a regulated price for each kilowatt-hour produced.

We are the world's experts on contingencies," boasted Michehl Ghent, president of the North American Electric Reliability Council, appearing in Houston on Sept. 17 at the Sixth Annual DOE/NARUC Electricity Forum. It was the very day day that NERC released its first comprehensive report on readiness in the electric utility industry in correcting computer software problems associated with the dawning the next century, which for the first time will require computers, software programs and embedded chips to the use four digits to identify the year beginning with turnover from 1999 to 2000.

TO DATE, RETAIL NATURAL GAS UNBUNDLING HAS proven to be only marginally successful. In political terms, state legislators and utility commissioners can point to significant progress in passing initiatives to mandate local utility unbundling. Many utilities have developed and won approval of new rate structures that enable small industrial, commercial and even residential customers to purchase natural gas from non-utility suppliers.

THE PRICING TURMOIL THAT STRUCK MIDWEST POWER markets during the week of June 22, with allegations of price gouging and calls for a wholesale price cap imposed by the Federal Energy Regulatory Commission (see Docket EL98-53), made for good copy but has obscured what's really going on.

"In the pleadings to FERC, I saw no evidence of price gouging," says attorney Jeffrey Watkiss, who represents power marketers who have asked the Commission for wholesale market reform.

IF AN INDEPENDENT SYSTEM OPERATOR OVERSEES THE TRANS-

mission grid, how much independence is too much? Should ISOs cede control over dispatch to scheduling coordinators, or market functions to a power exchange? Addressing some of these questions, a new report released in April by The Progress & Freedom Foundation criticizes a restructured electric industry built on ISOs with restricted authority.

PAT WOOD III LIKENS HIS JOB TO CLEARING THE UNDER-brush "so the general can march through."

The "general" is the Texas Legislature; Wood is chairman of the state Public Utility Commission; the battle is electric utility restructuring.

To an outsider, it looks like Wood's commission is way out in front of the state's elected officials. Legislators are adjourned this year but the seven-member Senate Interim Committee on Electric Utility Restructuring is doing its best to sort through hearings on market power, transmission and distribution, reliability and other issues.

An Editorial Response:

Some critics wants PMAs out of the electric business. But that could leave market power to a few, large monopolies.

Department of Energy Secretary Federico Peña observed in an address at the recent annual meeting of the Edison Electric Institute: "The [electric utility] industry is incredibly diverse, with investor-owned utilities, municipalities, cooperatives, the federal power system, independent power producers, marketers and others.

While approving a

three-year settlement on electric rates for Niagara Mohawk Power Corp., the New York Public Service Commission has accepted a highly controversial increase in minimum charges for low-use residential customers.

It also approved a plan to establish an

$11-million, ratepayer-supported fund to promote additional sales to large, alternate-fuel customers, but warned the company that the court would closely monitor relations between the utility and its energy marketing affiliate, Plum Street Energy Marketing.

Sound bites from state and federal regulators.

Natural Gas Briefs

Gas Marketing Affiliates. Indiana finds no jurisdiction to regulate Proliance Energy, LLC, a brokering and energy services affiliate of Indiana Gas Co., Inc. and Citizens Gas and Coke Utility, but says it will regulate the utilities in their transactions with Proliance. Case No. 40437, Sept. 27, 1996 (Ind.U.R.C.).

Gas Regulatory Reform. Ohio proposes alternative regulatory procedures for natural gas local distribution companies. Case No. 96-700-GA-ORD, Sept. 26, 1996 (Ohio P.U.C.).

Employee Incentives.

No one needs to tell the readers of PUBLIC UTILITIES FORTNIGHTLY about the technical, economic, regulatory, and institutional obstacle course facing the nuclear power industry. All you need do is look around to see an industry struggling to live up to expectations. Some would term the nuclear outlook "grim:"

• No economic incentives to build new nuclear plants.

• No new plant orders in the United States (a modest complement of foreign orders)

• Precious few attempts to renew operating licenses; even fewer succeed.