As regulators continue to investigate industrywide restructuring as an answer to regional electric rate disparities and calls from large consumers for price reductions, the trend of dealing with the problem through rate discounting also remains strong. Regulators have taken steps to ensure that shareholders bear at least some of the risk for revenue shortfalls that might result under the new contracts.
Merger Menace: Holding Companies and Overcapitalization
States remain as powerless to control holding companies as they were
in 1935, when PUHCA was passed.
During the 1970s and 1980s, diversification swept the gas and electric utility industries. One byproduct of this craze was the formation of a large number of new public utility holding companies, exempt not only from regulation by the Securities and Exchange Commission (SEC), but from state regulation over security issues.
The United States Enrichment Corp. (USEC), after consulting with the U.S. Treasury Department, has selected investment bankers for its proposed privatization. The Energy Policy Act of 1992 called for USEC to prepare two paths to privatization: an IPO and a negotiated mergers and acquisition transaction with a third party. USEC supplies 86 percent of the domestic uranium enrichment market, and 37 percent of the world market.
Based on competitive bidding, Morgan Stanley & Co., Inc. has been chosen as transaction manager.
The Nuclear Regulatory Commission (NRC) has authorized the Tennessee Valley Authority (TVA) to load fuel and perform low-power testing of the Watts Bar nuclear plant. The low-power license will allow the 1,160-megawatt Unit 1 to operate at 5 percent of capacity. The license verifies that Watts Bar construction is complete, and that all safety and environmental requirements have been met. A license to operate at full power may be granted once the fuel loading and low-power testing is complete. Commercial operation is anticipated for spring 1996.
On November 8, the Federal Energy Regulatory Commission (FERC) approved a major rate settlement on pipeline corrosion issues for the owners of the Trans Alaska Pipeline Systems (TAPS), based on a November 1994 agreement in principle among the parties. The settlement results from an alternate dispute resolution (ADR) technique that employed a mini-trial and involved high-level representatives for all parties.
The Federal Energy Regulatory Commission (FERC) has accepted proposed open-access, point-to-point, and network transmission service tariffs filed by Tampa Electric Co. (TE), effective November 14 (Docket No. ER95-1775-000) and subject to the outcome of its open-access Notice of Proposed Rulemaking (mega-NOPR) proceeding. TE says the tariffs substantially conform to the pro forma tariffs proposed under the mega-NOPR, and were calculated using the methods outlined there.
Finding that Enron Storage Co. lacks market power, the Federal Energy Regulatory Commission (FERC) has approved its request for market-based storage rates for firm and interruptible natural gas service under section 311 of the Natural Gas Policy Act of 1978, subject to conditions (Docket No. PR94-2-000). Enron proposed that rates for individual storage services be determined by the marketplace and agreed to by itself and the customer through arm's-length negotiations.
Change was the operative word this year in New Orleans at the annual gathering the National Association of Regulatory Utility Commissioners. Bob Anderson, Montana commissioner and outgoing president of NARUC, cited global competitiveness, technology and a political swing toward state's rights in his opening address. "State commissions have to respond to these powerful forces," he warned.
The decision in September by Malcolm S. Forbes, Jr., millionaire businessman sans political experience, to launch a bid for the White House in 1996 prompts comparison with another millionaire businessman and political neophyte, Wendell L. Willkie, who defied conventional wisdom 55 years ago and won the GOP nomination to oppose Franklin D. Roosevelt in the 1940 Presidential election.
Forbes himself relishes the comparison.
The Chapter 11 reorganization plans for The Columbia Gas System, Inc. (CGS) and Columbia Gas Transmission Corp., its principal pipeline subsidiary, were confirmed on November 15 by U.S. Bankruptcy Court Judge Helen Balick. The reorganization plans call for a distribution of about $2.3 billion to pay debt owed by the corporation prior to its Chapter 11 filing, plus another $1.1 billion in interest on that debt. According to CGS chairman Oliver G.