Generation: Big orDistributed power may turn

heads, but economics points

to central plants.

By Joseph F. Schuler, Jr.

By 2010, distributed power technologies will make up as much as 30 percent of new electric generation.

The battle to control profit margin really boils down to a battle for the customer premises, where the serious money resides.The gas and electric industries in the United States control about $900 billion in assets (production, logistical, merchant). They employ these assets to serve about 150 million customers (counted separately for gas and electric), but they manage to offer only two rudimentary products (em molecules and electrons (em and at only two levels of service: firm (supposedly) and interruptible (obviously).

even a two-handed economist can see that.The June 11 Power Broker decision from the D.C. Circuit, involving Florida Power and Light Co. (FP&L) and certain wholesale customers (see sidebar), reminds one that a dish of corned beef and cabbage tastes better when you don't leave out the cabbage.

On the surface, the case indicts the idea of average-cost pricing: "All hands recognize that the

problem originates in the use of average costs . . .

The West Virginia Public Service Commission (PSC) has approved a series of changes to its rules and regulations for gas utilities and gas pipeline safety. The changes include a new rule on customer deposits that calls for annual adjustment of the interest rate utilities pay on such deposits. The PSC explained that the change is designed to make the rate more market sensitive by tying it to U.S. Treasury Bill rates for the last quarter of the preceding year.

While approving a proposal by Marbel Energy Corp., owner of an independent gas and oil production business, to acquire Northeast Ohio Natural Gas Corp., a natural gas local distribution company (LDC), and Ohio Intrastate Gas transmission Co., an intrastate gas pipeline, the Ohio Public Utilities Commission (PUC) has directed both the LDC and the pipeline to offer nondiscriminatory open access to all of their service offerings. The PUC explained that the open-access condition would further competition in the state's natural gas industry.

The New Mexico Public Utility Commission (PUC) has rejected a request by PNM Gas Services, a division of Public Service Co. of New Mexico and a natural gas local distribution company (LDC), to implement two new experimental "optional utility services": 1) a Food Service Maintenance Program (maintenance and repair on commercial equipment), and 2) an Energyguard Bill Payment Protection Plan (insurance).

The Alabama Public Service Commission (PSC) has implemented a rate rebalancing plan to coordinate the pricing of services provided by telecommunications local exchange carriers (LECs) with recent efforts to open the local market to competition. According to the PSC, existing LECs that support underpriced local service with excessive access charges are at a significant disadvantage when they enter a competitive, price-regulated environment.

The Michigan Public Service Commission (PSC) has reaffirmed an earlier decision requiring Consumers Power Co., a natural gas local distribution company (LDC), to absorb revenue losses associated with special discounts granted to large transportation customers under contracts and tariffs approved by the PSC. While directing the LDC to reduce base gas rates by $11.73 million, the PSC ruled that Consumers had failed to prove that the discounts were justified by cost of service or that the load-retention aspects of the discounts conferred a general benefit on ratepayers.

The Hawaii Public Utilities Commission (PUC) has found a "qualitative assessment" of the external costs associated with supply options sufficient to approve an initial integrated resource plan (IRP) for Hawaii Electric Light Co., Inc.

While approving a proposal by Marbel Energy Corp., owner of an independent gas and oil production business, to acquire Northeast Ohio Natural Gas Corp., a natural gas local distribution company (LDC), and Ohio Intrastate Gas transmission Co., an intrastate gas pipeline, the Ohio Public Utilities Commission (PUC) has directed both the LDC and the pipeline to offer nondiscriminatory open access to all of their service offerings. The PUC explained that the open-access condition would further competition in the state's natural gas industry.