In an ideal world, legislation would have already happened."

That was Elizabeth Moler, deputy secretary of energy, testifying as the first witness at a Feb. 20 public conference at the Federal Energy Regulatory Commission. The forum attempted to address how to ensure access to transmission as the electric industry builds a new framework to maintain system reliability.

Having just stepped down from the top spot at the FERC, Moler knew what to expect. She understood the limits of the FERC's statutory authority and its budget.

Cynicism is nothing to scoff at. Cartoonist Scott Adams of Dilbert( fame has made a good living at it. But cynicism has an Achilles' heel. It reflects a certain lack of objectivity. It may deflect serious debate.

Consider the securitization of electric utility stranded costs. Last summer, after Ken Rose had thrown down the gauntlet against securitization, %n1%n I heard him speak at the 1997 NASUCA mid-year meeting and was struck that his message might make mischief in state regulatory and legislative arenas.

While U.S. natural gas prices increased about 7 percent from 1996 to 1997, the country ranked only 10th highest in a survey of gas prices in 13 industrialized nations. But first-quarter 1998 may tell a different story (see "Gas Price Volatility," Public Utilities Fortnightly, March 15, 1998, p. 38).

Gas Prices in Sweden jumped 30 percent over the last two years to 105.69 cents/therm in 1997, rocketing past an inflation rate of 20 percent. The major reasons for the price surge?

THE RAPID DEREGULATION OF THE BULK POWER MARKET has exposed utilities and power generators to the harsh reality of spot price volatility. This new reality begs the question: How can merchant generators, independent power producers and investor-owned utilities analyze their risk exposure when energy prices vary daily or even hourly?

The answer lies with spark spread options (em the link between electric power and gas prices.

MANY PLAYERS IN THE ELECTRIC INDUSTRY HAVE COME to believe that energy-only prices will soon replace the hundred-year tradition of pricing both energy and capacity.

This idea, sometimes called "monomic" trading, offers a seductive simplicity. Even so, research indicates that it is unlikely to work well.

First, consider some terminology. Traditional electric markets contain prices for both energy and capacity. Energy prices pertain to the actual kilowatt-hours. Capacity prices pertain to the right to take energy.

EL NIÑO HAS STRUCK, WITH NO END IN SIGHT.

Consider that Aquila Energy, the marketing arm of UtiliCorp United, has announced a new financial derivative, known as GuaranteedForecast,sm to hedge the weather against forecasts by the National Weather Service. The new product will pay holders a guaranteed amount if the mercury strays, and Aquila touts its thermometer hedge for any of 170 U.S. cities (em be it Spokane, El Paso, Chicago or New York. Why talk about the weather when you can invest in it, in true '90s fashion?

For this heating season, however, it may be too late.

THE U.S. ENVIRONMENTAL PROTECTION AGENCY HAD A novel idea: For power plants and sources relying on devices to control air emissions, rather than attempt to monitor the actual physical emissions to determine compliance with federal law, it simply would require inspections and tests of the performance of the control device. %n1%n

This strategy was formalized in the EPA's compliance assurance monitoring (CAM) rule signed Oct. 17, 1997. The EPA's theory is that if the control device is working properly, it is likely pollutant emissions fall within the required limits.

WHEN LAST I HEARD, U.N. SECRETARY GENERAL Kofi Annan had reached agreement with Iraqi President Saddam Hussein on weapons inspections, staving off war. But the American Gas Association is still battling the electric industry and the U.S. Department of Energy to save market share for its gas-fired water heaters. This battle is serious.

The water heater war takes in a wide range of issues and players. I hear that ASHRAE (the American Society of Heating, Refrigerating and Air-Conditioning Engineers), has raised gas industry ire with its new proposed standard 90.1.

PG&E Corp. promoted G. Brent Stanley to senior vice president of human resources and Greg S. Pruett to vice president of corporate communications.

CalEnergy Co. Inc. announced that J. Douglas Divine will serve as vice president of project development for CalEnergy Americas. Divine will be responsible for managing the business development activities throughout the Americas Region.

James M. Stephens was named president of Providence-Southern LLC. Prior to joining Providence-Southern, Stephens was assistant vice president of Reed Consulting Group. Stephens replaces Caroline K.

THE MIDWEST INDEPENDENT SYSTEM OPERATOR PROposal raises the lingering question of whether the ISO model represents a "stepping stone" or a final form of electric industry transmission management. Many players are split on which model would best serve an open electric market: an ISO, or financial separation of the transmission and distribution system from electric generation.

Within the generalized ISO framework, individual members would retain ownership and operate and maintain transmission assets.