Sound bites from state and federal regulators.

Natural Gas Briefs

Gas Rate Indexing. Alabama continues its a rate stabilization and equalization (RSE) procedure for Alabama Gas Corp. (rates adjusted quarterly to conform return on equity to a preset range). Commission says RSE plan has helped company address recent gas market changes such as supply diversification, system bypass, and competition. Docket No. 25600, Oct. 7, 1996 (Ala.P.S.C.).

Gas Motor Vehicles. Peoples Natural Gas Co.

By reversing a ruling by a federal district court judge, the United States Court of Appeals for the Ninth Circuit has effectively reinstated an antitrust suit by a natural gas marketer against Washington Natural Gas Co., a natural gas local distribution company (LDC), charging the LDC with "off-tariff" pricing and other practices designed to favor commodity sales over transport-only customers who buy their own gas directly, such as from marketers.

In reinstating the complaint, the appeals court denied any "state action immunity" against antitrust claims.

The Michigan Public Service Commission (PSC) has approved a comprehensive settlement in a series of closely watched cases in which Consumers Power Co. had proposed to realign electric rates and cost recovery to anticipate retail competition in electricity.

Among other points, the settlement allows Consumers Power to implement a "direct access" tariff to meet anticipated competition for its largest customers.

Despite an acknowledged drop in rates (down 11 percent in real terms over the last ten years) the Vermont Public Service Board has proposed to restructure the state's electric utility industry. The proposal would follow along the same lines envisioned by many other states (em i.e., competition and choice in the generation sector, with regulated monopolies for transmission and distribution services, plus recovery of "legitimate" stranded costs.

Beginning in 1998, retail customers could choose among competitive suppliers.

While approving the transfer of certain water utility assets and certificates between two utility companies, the Florida Public Service Commission (PSC) has decided against applying a negative acquisition adjustment to rate base in setting rates for the acquiring utility, even though the buyer paid "substantially less" than original cost for the facilities ($545,000 versus $2.845 million).

The PSC ruled that without extraordinary circumstances, its policy requires that a purchase of utility assets at a premium or discount should not affect the rate base calculation.

In two recent actions concerning natural gas marketers and brokers, the Pennsylvania Public Utility Commission (PUC) has proposed new policy to define its authority over marketing by the state's local distribution companies (LDCs) and their affiliates, plus a new rule requiring LDCs to set tariffed guidelines to ensure that marketers and brokers possess the financial and technical fitness necessary "to meet their contractual obligations" in transporting gas through LDC systems.

It stressed that it would not permit unreasonable discrimination in retail offerings (em whether by the LDC

Residential Pilot Programs:

Doing,

Dealing?

Customer choice and electric restructuring may appear synonymous to regulators, but for utilities "choice" means "market share."

THERE WERE 19 PILOT PROGRAMS

planned or underway in the United States by the end of November, involving some 500,000 customers in all classes. The goal? To test competition in retail electric markets.

In the residential class, pilots were operating in Illinois, New Hampshire, and New York. Massachusetts expected to roll out its pilot by January 1. Pennsylvania was planning an April startup.

Load Aggregation:

The Wolf at the Door?

Of course, there's nothing to stop a utility from aggregating its own customers.

WHAT, EXACTLY, IS LOAD "AGGREGATION?" Is it a threat, an opportunity, or merely a sales tactic?

Actions taken in California, as well as in pilot programs across the country, place customer aggregation on the leading edge of efforts to pull native load from electric utilities.

Ironically, present-day utilities already "aggregate" their customers (em albeit into a single group.

Incumbent monopolists won't command high premiums

if newcomers can rebuild capacity from scratch at a cheaper price.

At first glance, many of the nation's regional markets for wholesale electric generation appear monopolistic. In some of the 18 regional power markets we have identified, the leading companies account for 75 to 90 percent of the area's generating assets. In other markets, where the concentration problem does not yet seem as pressing, mergers and acquisitions threaten to raise levels of concentration of ownership in generation.

What do the first months of trading say about the spread between spot markets and futures prices?

ust over nine months ago the New York Mercantile

Exchange opened trading in the first-ever electricity futures contracts. As occurred

previously in oil and gas, futures trading in electricity

promises to play a central role in

commodity markets (em markets that are gradually evolving as competitive.

Electricity futures also provide a valuable tool for managers at utilities or other power producers.