Cost

THE ROAD TO RETAIL COMPETITION IS A LONG ONE. HAVING realized that, utility management has quelled its initial panic and has begun to concentrate on longer-term objectives. For instance, how much market share am I likely to lose during competition's early stages? And what prices can I charge to various customer classes without incurring a loss in market share?

The answer could affect decisions about future load, asset divestiture and competitive strategies.

CROSS THE COUNTRY, CRITICISM RISES FROM INVESTOR-owned utilities as public power agencies are drawn into regional or national markets through power pools and the geographic expansion of power marketing activities. Whether these agencies are seen as federally funded or just indirectly subsidized, the complaints remain the same: tax advantages, no reciprocity, exemptions from regulation.

Who really has power over the power? Do public power agencies enjoy an advantage, as private industry claims?

HYDROELECTRIC POWER ENGINEERS might fare all right. But office

administrators could face staff reductions of up to 50 percent.

Such are the recommendations filed March 10 by the Cost Review Management Committee assigned to recommend measures to the Bonneville Power Administration for its own internal cost review.

COMPETITIVE transition charges. Wires charges. Securitization payments. Every stranded cost recovery mechanism considered to date requires customers to pay for electric utility stranded costs through direct assessments on monthly bills. These charges will continue for many years after competition is introduced.

There is a real irony here: As we seek to introduce competition into the electric industry, we as regulators are forced to invoke all of the most heavy-handed tools to extract payments from citizens.

TELCO UNIVERSAL SERVICE FUND. Reversing an appeals court, the Kansas Supreme Court upheld a decision by the Kansas Corporation Commission that had required wireless telecommunications carriers to contribute to the state's universal service fund. It also affirmed a KCC ruling setting the initial amount of the fund in a roundabout way based on equalizing inter- and intrastate long-distance rates.

The KCC order (issued Dec. 27, 1996) had slashed intrastate toll rates by $111 million over three years. It then cut access charges by an equal amount to offset the loss to toll carriers.

LAST YEAR, IN JUSTIFYING THE PROPOSED NEW NATIONAL AMBIENT Air Quality Standards (NAAQS) for particulate matter and ozone, Environmental Protection Agency Administrator Carol Browner testified that: "During the 1990 debates on the Clean Air Act's acid rain program, industry initially projected the costs of an emission allowance¼ to be approximately $1,500¼ Today those allowances are selling for less than $100." %n1%n

Later in 1997, at the White House briefing announcing President Clinton's Global Climate Change Plan, Katie McGinty, chairwoman of the Council on Environmental Quality, sa

ARE NATURAL GAS UTILITIES DIFFERENT FROM THEIR ELECtric counterparts? Now that customer choice has become available in a few spots on the East and West coasts, can we expect some of the same opportunities to open up for gas consumers? Or are the industries incomparable, without lessons to learn from each other?

Cynicism is nothing to scoff at. Cartoonist Scott Adams of Dilbert( fame has made a good living at it. But cynicism has an Achilles' heel. It reflects a certain lack of objectivity. It may deflect serious debate.

Consider the securitization of electric utility stranded costs. Last summer, after Ken Rose had thrown down the gauntlet against securitization, %n1%n I heard him speak at the 1997 NASUCA mid-year meeting and was struck that his message might make mischief in state regulatory and legislative arenas.

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 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.