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Fortnightly Magazine - November 2005

Rate-Base Cleansings: Rolling Over Ratepayers

State PUCs should recognize a refundable regulatory liability for past charges to ratepayers.

The Financial Accounting Standards Board SFAS No.143 identifies an immediate need for state public utilities commissions to recognize a refundable regulatory liability for past charges to ratepayers for non-legal asset retirement costs. Although these prior charges resulted in billions of dollars of regulatory liabilities on utilities' generally accepted accounting principles financial statements, they are almost invisible on the regulatory financial statements of the utilities. Unless the state PUCs specifically recognize the liabilities, the utilities will have the opportunity to institute a rate-base "cleansing" by transferring ratepayer-fronted money into income.

Byline: 

Michael J. Majoros Jr.

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Frontlines

Is the predicted crisis this winter a failure of policy, the market, or both?

Given the free market in natural gas, why haven't prices attracted the needed infrastructure or supply? (LNG imports are actually down from last year.) What policies could have been contemplated ahead of national legislation? Or put more simply, why has supply lagged demand?

Byline: 

Richard Stavros

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People

PPL Corp. named C. Joseph Hopf, vice president of energy trading for Goldman Sachs in New York, as PPL's lead energy marketing executive. PG&E Corp. elected President and CEO Peter A. Darbee to the additional position of chairman of the boards of directors for the corporation and its utility unit, Pacific Gas and Electric Co. Executive Vice President and COO Thomas B. King was elected the utility's president and CEO, as well as a member of the Pacific Gas and Electric Co. board of directors. Also, PG&E Corp. and its utility unit, Pacific Gas and Electric Co., made seven new appointments at the officer level. And others...

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Power Measurements

The new Clean Air Interstate Rule is having an unexpected impact on power generation asset values.

With compliance costs estimated at $50 billion to $60 billion during the next 15 years, the Clean Air Interstate Rule (CAIR) affects just about every market participant in the electric power industry.

Byline: 

Gary L. Hunt

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New England: A Critical Look at Competition

Seven years after restructuring, challenges remain. Should the region stay the course?

Electric restructuring—identified in some quarters with Enron, California, and the August 2003 blackout—has brought significant, measurable benefits to us in New England. Seven years after restructuring began, it's a good time to assess the challenges that remain and gauge whether to stay the course toward continued restructuring.

Byline: 

Gordon van Welie

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Commission Watch

FERC mulls rival plans at the last minute, while on the West Coast, California gets into the game.

FERC, the ISO, and many other parties had seen no reason for further debate over the need for a location-specific capacity market. By limiting debate, FERC had foreclosed a raft of competing ideas. When the moment finally arrived for the oral argument at FERC, attorneys and witnesses attempted valiantly in the precious few minutes allotted each speaker to flesh out new ideas, and the commissioners struggled as well to keep up. This highly unusual situation made for a helter-skelter hearing, with new topics seeming to come out of the woodwork.

Byline: 

Bruce W. Radford

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Business & Money

Presenting a new management model.

Utility companies are at a crossroads when it comes to managing their pension plans. They must determine the best ways to continue to offer this benefit while controlling the impact these plans have on the overall financial health of the organization.

Byline: 

Jim Morris

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Technology Corridor

The nation's critical electric infrastructure is still too vulnerable to outages.

The Sept. 12, 2005, electricity blackout of most of the city of Los Angeles demonstrates the continuing vulnerability of the nation's electric infrastructure. Although the cause of the Los Angeles outage was accidental, it exposed a glaring weakness: cable line breaks are an attractive, easy target for terrorists, because the U.S. electric network has thousands of miles of unguarded transmission and distribution lines.

Byline: 

Greg Aliff and Branko Terzic

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Regulators Forum: Shifting Winds, Shifting Strategies

State regulators grapple with investments, supply planning, and structural issues.

The opposing challenges of higher gas prices and rising environmental concerns have put utility regulators in a difficult position: How can they bring rate stability while minimizing environmental impacts? At the same time, they are grappling with trends in consolidation, competition, transmission planning, and distribution service quality. Each state brings a different view of the changing utility landscape. For insight, Fortnightly brought together regulators from several states to discuss their plans and priorities for today and the future.

Byline: 

Michael T. Burr

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Focus on LNG Siting: A State Perspective

Congress revamps LNG and storage, giving broad new powers to FERC. Why the Feds still must consult with local authorities.

A major objective of the Energy Policy Act of 2005 (EPACT) is to counter the worsened conditions in the natural-gas market that began in 2000 and are expected to continue over the next several years—namely, tight natural-gas supplies and high, volatile gas prices caused by a distinct shift in the supply-demand balance. Any noticeable reductions in gas prices that might be effectuated by the act will have little impact on natural-gas prices for a number of years.

Byline: 

Ken Costello

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