Forecasts Send ROEs Wide of the Mark
In a recent "Offpeak" ("Forecasting is Just That," Jan. 1, 1996, p. 54), David Foti and Clay Denton report data showing the percentage of error found in various seven-year forecasts of natural gas prices (1988-94) produced by the American Gas Association (A.G.A.), Energy Information Administration (EIA), DRI/McGraw-Hill (DRI), Gas Research Institute, and WEFA Group. These errors ranged from approximately 50 to 95 percent.
The Federal Energy Regulatory Commission (FERC) has declined jurisdiction in a dispute between Montana Power Co. and Puget Sound Power & Light Co. over a firm purchased-power contract and the seller's obligation to exert "best efforts" to secure necessary firm contractual rights to transmission service to complete the firm power transaction. The FERC prefers that the matter be heard in the federal district court in Montana, where related litigation is already pending.
The Larger, the Better
In recent years, increased competition and the threat of deregulation have spurred numerous mergers and acquisitions. Fourteen mergers have been completed by investor-owned utilities (IOUs) over the last five years; seven more have been announced. If all of these mergers receive approval, nearly 20 percent of the IOUs that existed in 1990 will no longer exist.
Niagara Mohawk Power Corp. (NiMo) has asked the Federal Energy Regulatory Commission to rule that a New York state law violates the Public Utility Regulatory Policies Act of 1978 (PURPA) by requiring ratepayers, in effect, to reimburse gas-fired QFs (qualifying facilities) for payments made under a state-imposed, 4.25-percent natural gas import tax.
NiMo says that the tax and the reimbursement mandate will add $7.2 million to the electric bills of its customers in 1996 (em a figure that could climb to $13.5 million by 2006.
CMS Generation Co., a unit of CMS Energy Corp., has begun operating the 35-Mw, waste-wood-fueled, independent Genesee Power Station near Flint, MI. CMS Generation will sell the electricity to Consumers Power Co. under a long-term contract. Half the plant is owned by CMS, half by Black & Veatch Development Corp. and Genesee Power Co.
Another unit of CMS Energy, CMS Gas and Electric Marketing, has signed an agreement with Marine Coal Sales Co. of Indianapolis, IN, to market electricity, coal, and natural gas in the east central United States.
New England Electric System (NEES) and the majority leaders of both houses of the Rhode Island Legislature have proposed legislation that would restructure the state's electric utility industry. The legislation provides for full recovery of all stranded costs, and phases in open access for all retail customers by January 2001. Although customer choice would come about relatively quickly, rates would not decline much in the near term because a transition charge shields NEES from most of the restructuring risk.
Moody's Investors Service has completed its Western Grid Surveillance Review, a study that assessed the potential impact of the California Public Utilities Commission's (CPUC's) electric restructuring proposal on municipal utilities in that region.
On May 31, 1995, the Federal Energy Regulatory Commission (FERC) issued its Statement of Policy in Docket No. PL94-4-000, Pricing Policy for New and Existing Facilities Constructed by Interstate Natural Gas Pipelines.1 In that decision, the FERC sought to provide upfront rate certainty, thereby giving pipelines and shippers a firm basis for making decisions on large-scale investments.
But is that objective realistic?
The Massachusetts Division of Energy Resources (DOER) has filed its electric restructuring proposal, "Power Choice," as part of the Massachusetts Department of Public Utilities investigation into competition. The proposal will be considered along with restructuring plans submitted by the state's three largest utilities.
Power Choice calls for electric utilities to voluntarily separate into generation and distribution companies. Customers would continue to receive distribution service through their present providers; generation would become competitive.
The California Public Utilities Commission (CPUC) has approved a proposal by Sierra Pacific Power Co. to construct a 345-kilovolt overhead transmission line, but not simply to gain access to low-cost power. Instead, the CPUC appeared to emphasize concern over reliability.
Sierra Pacific, involved in merger plans with The Washington Water Power Co., had cited access to low-cost power from the Bonneville Power Administration as an important reason to build the transmission line.
