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Fortnightly Magazine - September 15 1997

What's a Power Plant Worth

"Spark spread" sets value, but as prices diverge from system

lambda, merchant plant buyers will be flying blind.

Many power plants will be bought and sold in the next decade. Some utilities will divest power plants as required by regulators; others will sell for strategic reasons. Most of the plants sold likely will become merchant plants, with no guaranteed market for their electric output. Merchant plant activity is already significant and growing. The value of these plants will depend on how well they can perform in an uncertain market.

Byline: 
Jeffrey P. Price
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OASIS Problems, Solutions Brought to FERC's Attention

The Federal Energy Regulatory Commission invited industry representatives to Washington, D.C., in July to talk about the electric utility industry's implementation of OASIS, or open-access, same-time information system, which is used to monitor and schedule electric transmission capacity.

It ended up with an earful about problems on the on-line system.

Gerry Cauley, of the industry's volunteer "How Working Group," said, "Overall, the OASIS does provide comparable access," and the system is seeing reservation activity at expected levels.

Byline: 
Lori M. Rodgers
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Far From Closure: No Consensus Yet on Accounting Proposal for Decommissioning

In aiming to make financial statements more meaningful, will FASB instead make them indecipherable?

By mid-summer, a total of 123 companies had cranked out some 574 pages of comments, detailing exactly what they thought of the accounting rules proposed by the Financial Accounting Standards Board to cover the closure or removal of certain long-lived assets. %n1%n The FASB's"Exposure Draft," issued early last year, had requested comments on eight issues. The respondents answered as requested, but also raised a host of new questions.

Byline: 
John S. Ferguson
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FERC Delays Four-Way Combo

U.S. District Court in New Hampshire has denied a move by customers and ratepayer groups to intervene in litigation on electric restructuring simply on the basis that they wanted lower rates.

The court said that a general desire to pay lower rates was not specific enough to intervene in the lawsuit, which was filed by several large electric utilities to challenge elements of the plan for competition approved in February by the state Public Utilities Commission. See, Re Restructuring New Hampshire's Electric Utility Industry, Order No. 22,514, 175 PUR4th 193 (N.H.P.U.C.).

Byline: 
Phillip S. Cross
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Job Protection Measures

Key points from approved and pending legislation

California:

A.B. 1890, signed into law Sept. 23, 1996.

• Plant Divestiture. To ensure the safe, reliable operation when utilities sell off generating facilities, buyers or successor corporations must keep the current staff on board for at least two years.

• Stranded Cost Recovery. Statute recognizes explicitly that transition to customer choice can produce employee hardships.

Byline: 
Joseph F. Schuler, Jr.
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FERC Approves Two Convergence Combos

The Federal Energy Regulatory Commission has approved the merger of Brooklyn Union Gas Co. and neighboring Long Island Lighting Co., although concerns emerged about potential vertical market power. A new holding company, temporarily called HoldCo, will run the merged corporation.

At the same July 16 meeting, FERC indirectly sanctioned the merger of Texas-based Valero Energy Corp. with PG&E Corp., the holding company (created Jan. 1, 1997) for California-based Pacific Gas & Electric Co.

LILCO + Brooklyn Union.

Byline: 
Lori A. Burkhart
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News of Coal's Demise Could Prove Premature

Despite recent announcements by the Environmental Protection Agency to place additional restraints on power plant emissions, coal continues to dominate electric fuels markets. Though some fear new EPA standards could pressure marginal coal plants to close, it is unlikely this will happen. Coal markets are propped up by a marked decrease in contract prices, cleaner mining, productivity gains, troubled nuclear power and instability in gas and oil prices.

Byline: 
Kent Knutson
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In Brief...

Sound bites from state and federal regulators.

Build vs. Buy. Finding the "build" option as the cheapest alternative when two purchased power contracts expired, Florida PSC allows Tallahassee municipal electric utility to construct a 250-megawatt, combined-cycle, natural gas-fired power plant at an existing generation site. Docket No. 961512-EM, Order No. PSC-97-0659-FOF-EM, June 9, 1997 (Fla.P.S.C.).

Special Contract Discounts. New Jersey allows Elizabethtown Gas Co.

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Frontlines

My electric company, Potomac Electric Power Co., has announced a joint venture with RCN Corp. of Princeton, N.J., to offer local and long-distance telephone service to callers in Washington, D.C., and nearby areas, plus cable television and high-speed connections to the Internet. With stockholder money, PEPCO would compete head-on against Bell Atlantic, which won approval from the Federal Communications Commission on Aug. 14 for its $25-billion merger with NYNEX.

Reporting the story, The Washington Post quoted PEPCO President John M.

Byline: 
Bruce W. Radford
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N.H. Ratepayers Lose in Bid to Support Electric Plan

U.S. District Court in New Hampshire has denied a move by customers and ratepayer groups to intervene in litigation on electric restructuring simply on the basis that they wanted lower rates.

The court said that a general desire to pay lower rates was not specific enough to intervene in the lawsuit, which was filed by several large electric utilities to challenge elements of the plan for competition approved in February by the state Public Utilities Commission. See, Re Restructuring New Hampshire's Electric Utility Industry, Order No. 22,514, 175 PUR4th 193 (N.H.P.U.C.).

Byline: 
Phillip S. Cross
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