As the U.S. electric power industry unbundles, the industry and its regulators grapple with two big questions concerning the degree to which distribution services should be unbundled. First, what groups of distribution activities can separate suppliers provide? Second, which of these groups of activities should be open to competition?

Looking at the unbundling experiences of Argentina, Australia, Canada, Chile, Norway and the United Kingdom sheds light on these questions. The distribution unbundling of the U.S. gas and telecommunications industries provides additional insights.

PURRED BY FLAT POWER DEMAND AT HOME IN RESIDENTIAL and industrial markets, U.S. utilities are taking huge risks in Latin America. Why? They are enticed by the promise of high-yield returns on generation, distribution and transmission deals.

Yet only some of the companies getting in on the ground floor of privatization or winning concessions in the Latin American energy market stand to make huge profits. Others, too slow to beat competitors, or not savvy enough to skirt political and regulatory land mines, could lose their shirts.

April 01, 1998

WHICH NUCLEAR PLANTS WILL SURVIVE competition? To answer that question, senior managers at electric utilities must know a nuclear plant's true economic potential. Without an accurate understanding of operating economics, a utility might lose a good plant or waste resources on poorer plants that should be closed.

Of course, a shutdown may be appropriate at some plants (em perhaps a few situated in the most competitive regions, or others plagued by poor inherent physical characteristics. However, most U.S.

THE COMPETITIVE ENTERPRISE INSTITUTE, A FREE market think tank, announced its entry into the electric power market and demanded that utilities open up the power grid to its services.

Says CEI Fellow in Regulatory Studies Wayne Crews: "The pervasive thinking among so-called reformers is that just because somebody spins magnets, they have a right of access to utility wires property. Well, we're tired of fighting that idea.

THE U.S. TREASURY DEPARTMENT HAS ISSUED RULES that will allow all public power systems to participate in independent system operators without risk of losing the tax-exempt status of their bonds.

Investor-owned utilities are not happy. According to the Edison Electric Institute, the regulations significantly expand the ability of large government-owned electric utilities to use federal subsidies to compete against private utilities.

Meanwhile, the American Public Power Association is pleased that the rules passed Jan.

TWO RECENT shocks could turn up the pressure on Canada's two state electricity giants to deregulate.

After January's ice storm, about half Quebec's population went without heat or light for up to a month (em at the coldest time of the year. Almost one-quarter of the provincial economy was shut down. It was the continent's worst-ever blackout and Canada's worst natural disaster. It cost Quebec 1 percent of its flagging gross domestic product.

The ice storm affected Ontario Hydro much less.

State Legislatures

CALIFORNIA ELECTRIC RESTRUCTURING. California Assemblywoman Diane Martinez, chairwoman of the Utilities and Commerce Committee, has introduced two new bills aimed at protecting consumers in a competitive market. But the measures already have been put on hold for this year. The first bill, AB 579, would cut rates for residential and small-volume commercial customers by 20 percent, rather than by 10 percent as promised in the state's restructuring act, AB 1890.

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.

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.

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.