Fortnightly Magazine - September 15 1998

SEVERAL YEARS AGO, ENGINEERS AT AMERICAN ELECTRIC Power measured the transfer capability or transmission capacity (in this article we will use the terms interchangeably) between AEP and Commonwealth Edison. Using traditional methods, they found that the winter transmission capacity that year was 3,500 megawatts.

Then they performed a more exhaustive and nonstandard analysis. It showed that during the month of January, transmission capacity actually varied from a low of 1,600 MW (less than half the nominal amount) to a high of 6,000 MW (70 percent higher than nominal).

Does it make sense to deregulate utility meters before knowing how (or if) competition will work in the electricity industry? Or is it better to wait, to get a better idea of what customers will want, need and be willing to buy?

After all, the point is to give better choices to consumers. Shouldn't they have a say?

To open electric metering to competition implies standardization - collecting groups of engineers and scientists to approve technical standards for data formats and telecommunications protocols to achieve some degree of interoperability for equipment and software.

THE LIST OF COMPANIES STUNG BY RECENT ELECTRICITY. price spikes in he Midwest continues to expand, as cries for price caps grow loader. Much has been said of the dollar amounts lost and who has incurred those losses; yet few have questioned the fundamentals driving this market. Understanding what's behind the recent market uproar is the first step in deciding how well the market functions.

Regulators should be careful not to slow the restructuring process simply because of this price volatility, but they should pay very close attention to its causes.

Efforts to make generation competitive have induced several electric utilities to sell their power plants. Some sales are voluntary. Some are forced by rules mandating functional segregation from transmission and distribution. Of those sales announced or completed, most have involved high-cost utilities, and all have garnered at least book value, suggesting an attempt by sellers to deal with stranded costs.

Why then, are buyers willing to pay more than book value? They must believe they can improve on cash flows - either by raising revenues, trimming costs, or both.