Fortnightly Magazine - March 15 1997

Two months ago in this space, I interviewed a power marketer and an independent power producer who sit on the operating and engineering committees of the North American Electric Reliability Council. What did they think of NERC, a group formed to prevent large-scale power outages and made up largely of volunteers from investor-owned electric utilities? Were they treated fairly? Did they have a chance to influence policy?

In general, my two "outsiders" felt satisfied with their status on the committees, though some skepticism emerged about NERC's internal decision-making process.

As the U.S. Congress works to pass federal legislation introducing competition into the electric utility industry, one of the most divisive issues regulators and policymakers must grapple with is that of stranded cost. In a recent study completed by Resource Data International, we have found that an important issue will be how "negative" stranded costs are handled.

At the heart of our study is a detailed, plant-by-plant, analysis of stranded costs for every utility in the country. We estimate that the total above-market stranded cost nationally is $202 billion.

After months of trying, which included the derailment by Western Resources of the proposed merger of UtiliCorp United and Kansas City Power & Light Co., the boards of directors of Western Resources and Kansas City P&L have approved a merger of the two companies in a stock-for-stock transaction valued at $2 billion. If approved by the necessary regulatory authorities, the new company would have $9.5 billion in assets, $3 billion in annual revenues and more than 8,000 MW of electric generation.

The New York Public Service Commission on Feb. 12 pushed toward competition by approving a multi-utility pilot program for electric retail access for commercial farms and food processors, and by allowing utilities to use their flexible-rate programs to compete against economic-development power offered by the New York Power Authority (Docket 97012/94EO385).

The Dairylea farming cooperative had asked the commission to approve a pilot open to commercial farms and food processors, except those that already have flexible rate contracts. The PSC agreed.