Minnesota Coalition Joins Debate
A broad coalition of Minnesota electric cooperatives, municipal utilities, consumer advocates, and environmentalists has joined the debate over the restructuring of the state's electric industry.
Fortnightly Magazine - October 15 1995
TEP's Holding Co. Status on Hold
The staff of the Arizona Corporation Commission have recommended rejection of a Tucson Electric Power Co. (TEP) proposal to form a holding company, with TEP becoming a wholly-owned subsidiary. The proposal reflects TEP's desire to pursue opportunities in the domestic and international power markets, including development of independent power projects, acquisition of interests in existing power facilities privatized by foreign governments, and construction of cogeneration facilities to serve the energy needs of large industrial customers.
Byline:
Lori A. Burkhart
Southwestern Merger: A New Breed
Southwestern Public Service Co. (SPS) and Public Service Co. of Colorado (PSCC) have entered into a definitive merger agreement to form a public utility holding company that will cover one of the largest geographic areas in the nation. Size apart, the merger is unique in that SPS operates as part of ERCOT, and the two utilities are not interconnected. A new transmission line will be built to connect the two companies.
The new holding company will have combined annual revenues of $3 billion, and assets of $6 billion.
Byline:
Lori A. Burkhart
S&P: Municipal Tactics as Effective as Mergers
Standard & Poor's (S&P) CreditWeek Municipal notes that municipal electric utilities are resisting the investor-owned utility (IOU) merger trend in favor of competing through internal cost controls and sharing of services. The main reason, according to S&P directors Marla Fox and William Cox, is that municipals are political entities governed by city councils or appointed boards, and mergers would result in less authority for those decisionmakers.
Byline:
Lori A. Burkhart
Central Illinois Proposes Direct-access Pilots
Citing a need to prepare for the emerging competitive marketplace, Central Illinois Light Co. has volunteered to experiment with direct access for all of its customers. The utility has asked the Illinois Commerce Commission to consider two separate pilot programs that will allow customers to purchase some or all of their power requirements from other suppliers.
Byline:
Lori A. Burkhart
Mortgaging Your Conservation: A Way Out for Stranded Investment?Andrea L. Kelly and Donald E. Gaines
When an electric utility invests in a resource to serve its customers, it does so with the belief that the asset underlying the investment can be pledged as collateral to secure debt capital. But what happens if the asset is not owned by the company and, therefore, provides no collateral? The following situations illustrate:
Situation A
Electric utility "A" chooses to build a small generating plant to meet the future needs of its growing customer base.
Byline:
Andrea L. Kelly and Donald E. Gaines
Perspective
One of the iron rules of competition and open markets is that there are winners and losers. Winners tend to win very big; losers tend to lose everything and disappear, through absorption or insolvency. As deregulation takes hold, high-cost producers and less adroit managers may find themselves steamrollered by emerging strongmen and entrepreneurial upstarts. These rivals may usurp segments of their business by bidding the job cheaper and still making money, leaving a rising tide of shareholder suits in their wake.
Byline:
J. Michael Parish
Commentary: Making Restructuring ProfitableRalph Cavanagh
Investments that minimize life-cycle costs of reliable energy services should be more profitable to utilities than those that fail that test. This perceptive article shows that Puget Power and the Washington Utilities and Transportation Commission (UTC) share that view.Too many utilities still hesitate to finance energy savings that cost less than the displaced power production.
Byline:
Ralph Cavanagh
GAO Reports, TVA Retorts
The U.S. General Accounting Office (GAO) has released its report on the Tennessee Valley Authority (TVA), Financial Problems Raise Questions About Long-Term Viability (em a report that TVA strongly disputes.
Byline:
Lori A. Burkhart
Utility Finance After the TransitionJames T. Doudiet, John Higley, and Patricia Eckert
DOUDIET:Stranded investment has overshadowed other financial issues in the transition to a competitive electric utility industry. For example, what will post-transitional companies look like? Will they attract growth-oriented investors?
Utilities as monopolies enjoyed unparalleled access to the capital markets because price was based on cost. That structure assured the ability to raise funds under any and all circumstances, but it created an atypical industry.
Byline:
James T. Doudiet, John Higley, and Patricia Eckert