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Fortnightly Magazine - June 15 1998

Benchmarks

THE ENVIRONMENTAL PROTECTION AGENCY HAS PROPOSED wide-ranging regulations that will increase the cost of electricity production, particularly at the nation's lowest-cost, coal-fired generators.

Despite a doubling of electricity generation since 1970, atmospheric concentrations of sulfur dioxide and nitrogen oxide have declined. Title IV acid rain provisions of the Clean Air Act Amendments of 1990 will result in even greater reductions over the next few years. EPA has nevertheless charted a course to reduce utility emissions of these pollutants even further.

Byline: 
Christopher D. Seiple and Todd Myers
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News Digest

PIPELINE CONSTRUCTION. Chief Judge D. Brock Hornby of the U.S. District Court in Maine, decided to allow Portland Natural Gas Transmission System access to electric transmission corridors owned by Central Maine Power Co. The access will be used to install a natural gas pipeline.

Portland received FERC approval Sept. 24 for installing and operating a 292-mile, $302-million interstate pipeline. CMP owns about 70 miles of the electric transmission corridor. The preliminary injunction, issued April 10, gives Portland access to property on CMP-owned transmission corridors.

Byline: 
Lori A. Burkhart, Phillip S. Cross and Elizabeth Striano
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News Analysis

EVEN IF 3,000 WORKERS AT THE LOS ANGELES DEPARTMENT of Water and Power should opt for a separation package instead of wholesale layoffs, an ad hoc employee group plans to go ahead with a lawsuit claiming the deal violates California's restructuring statute, Assembly Bill 1890.

That move to go to court - as described by a representative of the Employees Legal Defense Fund - could supply a bargaining chip to help the ELDF save the jobs of a few hundred workers who might not take the package but whose positions are targeted for cuts. The department has about 8,600 employees.

Byline: 
Joseph F. Schuler Jr.
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Perspective

COMPETITIVE transition charges. Wires charges. Securitization payments. Every stranded cost recovery mechanism considered to date requires customers to pay for electric utility stranded costs through direct assessments on monthly bills. These charges will continue for many years after competition is introduced.

There is a real irony here: As we seek to introduce competition into the electric industry, we as regulators are forced to invoke all of the most heavy-handed tools to extract payments from citizens.

Byline: 
Craig A. Glazer
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Special Report

THE RUSSIAN FEDERATION WANTS U.S. UTILITIES AND businesses to know investments are welcome and that processes soon will ensure the safety of American ventures there.

Nevertheless, it appears to favor traditional, American-style utility regulation, setting rates of return and limiting profits.

The Federal Energy Commission of the Russian Federation wants to create competition wherever possible, according to Andrey F. Zadernyuk, the first chairman of the year-old commission.

Byline: 
Lori A. Burkhart
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Off Peak

DEREGULATION OF ANY INDUSTRY OFTEN LEADS TO consolidation and merger, which frequently bolsters the involved companies' stock prices.

In the SBC/Pacific Telesis merger, intervenors argued before the California Public Utilities Commission that the change in the value of Pacific Telesis' stock was a measure of the merger's "benefits" to shareholders. They said the PUC should force the merged company to rebate half those benefits to ratepayers.

Analysts use stock market information in an "event study" to measure the economic impact of a particular event.

Byline: 
Alan J. Cox and Jonathan Portes
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Ma Bell's Legacy: Time for a Second Divestiture?

TWO YEARS HAVE ELAPSED SINCE CONGRESS PASSED THE Telecommunications Act of 1996 to "provide a pro-competitive, de-regulatory national policy framework designed to accelerate rapidly private sector deployment of advanced telecommunications and information technologies and services to all Americans." %n1%n

Today, however, telephone deregulation has reached an impasse. Few customers enjoy competitive alternatives for local exchange service. Concentration in long-distance markets appears to be increasing.

Byline: 
Trevor R. Roycroft, Ph.D.
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Inventing a Business in Wires & Pipes

IF COMPETITIVE ELECTRIC MARKETS PROMISE LEAN MARGINS and slim savings on commodity sales, then perhaps transmission and distribution companies could play a larger role in selling end-user services.

Yet low-risk T&D companies, building on their reputations as reliable providers, may need to grow to acquire the "critical mass" needed to make money selling services over delivery systems.

One of the few, if not only, businesses publicly betting on this strategy is the $4.1-billion GPU Inc. of Morristown, N.J. - and GPU means business.

Byline: 
Joseph F. Schuler Jr.
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Universal Service: A Performance-Based Measure for Competitive Industry

UNIVERSAL SERVICE ATTRACTS MUCH ATTENTION these days, both in energy and telecommunications. But how do you measure success? Do regulators decide when goals are met by looking across an industry, or should management make the call company by company?

Consider the Telecommunications Act of 1996. It identifies the maintenance of affordable, or "universal," service for low-income consumers as an explicit statutory goal. In the electric industry, virtually every piece of restructuring legislation and every regulatory decision to date has included a universal service provision.

Byline: 
Roger D. Colton
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Competitive Reciprocity: By Checklist or Certification?

IF CONGRESS SHOULD CONSIDER LEGISLATION TO MANDATE retail wheeling - and even with a date certain - those states that have already opened their markets will still likely ask for reciprocity to guarantee that any competitor seeking entry will welcome competition in its own home territory. Why? Some states are moving more quickly than others. Second, others have indicated they do not intend to open at all.

Arguably, state lawmakers could enact a reciprocal covenant on their own.

Byline: 
M. Bryan Little
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