"Spark spread" sets value, but as prices diverge from system

lambda, merchant plant buyers will be flying blind.

Many power plants will be bought and sold in the next decade. Some utilities will divest power plants as required by regulators; others will sell for strategic reasons. Most of the plants sold likely will become merchant plants, with no guaranteed market for their electric output. Merchant plant activity is already significant and growing. The value of these plants will depend on how well they can perform in an uncertain market.

In Norway and in England and Wales, power retailers are learning hard lessons.

The U.S. electric industry has long tried to follow Thomas Edison's dictum "to sell light instead of current" (em to get beyond the meter. But what is beyond the meter at industrial and commercial sites?

In energy-intensive industries one sees processes such as smelters, pulp mills, rolling mills, refineries and chemical plants. In general manufacturing, although some electricity is used for specialized electrotechnologies, most is used for lighting, motive power, computing and robotics.

In union circles, they call it "burial insurance." That apt phrase denotes the severance, early retirement and re-training packages negotiated for veteran utility workers sideswiped by a changing market.

So far, labor has won some insurance: through legislation in California and in Maine; through a commission order in Massachusetts; and a pending settlement agreement in New York City, prompted by a commission order.

Labor lost hard in Pennsylvania and in Rhode Island, however. Worker protections weren't built into restructuring decisions in those states.

Consumers want the credit option, study says.

More than 5 percent of all recurring bills - like phone, magazine and insurance bills - are paid with a credit card (see Chart 1), according to a study conducted by Market Facts Inc. for Visa U.S.A. Yet less than one-half of 1 percent of consumers pull out their plastic to pay utility bills (see Chart 3).

Here's one likely reason: Only 8 percent of all utilities accept credit card payments (see Chart 2). Utilities may want to reconsider their offerings, however.

The Alabama Public Service Commission has formally requested that state law enforcement officials prosecute a reseller of telecommunications services for ongoing incidents of "deceptive and misleading" marketing activities.

The so-called "slamming" practices include switching customers without documenting their consent. Earlier in the year, the commission had found that Long Distance Services Inc. had engaged in a series of improper practices, including the use of sweepstake boxes, to sign up new customers to its service without proper consent.

The New York Public Service Commission has directed Consolidated Edison Co. to modify its gas transportation rates to more accurately reflect costs.

The commission said that the tariff revisions mark a "major step" for a service territory where competition between the utility and gas marketers had not yet developed.

Regulators in Pennsylvania and New Jersey have taken steps to address relationships between natural gas utilities, customers, marketers and brokers operating in their respective states, announcing policies to cover such topics as fitness requirements, marketing practices and consumer protection.

One question that continues to raise concern is price arbitrage by marketers during supply emergencies that might affect service to captive residential customers.

Pennsylvania.

As it concluded its first review of an alternative rate plan for local telephone service, the New Jersey Board of Public Utilities approved a series of telecommunications network upgrades and associated network modernization program for Bell Atlantic-New Jersey.

The original rate plan, approved in 1993, had combined the promise of a modernized telephone infrastructure with rate deregulation for certain competitive services and a freeze on rates for residential phone service. (See, Re New Jersey Bell Tel.

The California Public Utilities Commission has valued sunk costs for the Diablo Canyon nuclear generating plant at $3.287 billion. The ruling forms the basis for future ratemaking treatment for the plant assets by its owner, Pacific Gas and Electric Co., according to industry restructuring under way in the state.

The approved rate plan includes an overall rate freeze and a bond-financed 10-percent rate reduction for residential and small commercial customers. Both are called for under the state's new electric industry restructuring law (Assembly Bill 1890).

Regulated customers of Portland General Electric Co. will receive compensation both for lost profits and for future, anticipated efficiencies under the final decision issued by the Oregon Public Utility Commission that approved the merger between PGE and Enron Corp.

Under the approved merger plan, Enron will absorb the utility's corporate parent, Portland General Corp.

As a result of negotiations between the merging companies and the commission's staff, Enron has agreed to guarantee "monetary compensation and benefits" to Oregon ratepayers in the amount of $141 million.