Cost

While setting a new gas cost adjustment rate for Delmarva Power & Light Co., a combined electric and gas utility, the Delaware Public Service Commission (PSC) found the utility's unaccounted-for-gas incentive program unnecessary because it had accomplished its objective, as evidenced by a steady decline in the rate of unaccounted-for gas. The PSC approved a $300,000 incentive award for the current adjustment. Re Delmarva Power & Light Co., PSC Dkt. No. 94-123F, March 21, 1995 (Del.P.S.C.).In another case, the PSC allowed Chesapeake Utilities Corp.

PV technology combined with storage offers a cost-effective alternative to capacity additions.By John Byrne,

Young-Doo Wang,

Ralph Nigro, and

Steven E. Letendre

Until recently, both regulators and electric utilities have considered photovoltaic (PV) technology (i.e., solar cells) an unattractive

energy-supply option because of its relatively high cost. Now, however, a number of utilities have shown interest in using PV for peak-shaving.

mergers? For

instance, why

combine two vertically integrated utilities when the market may call for disaggregation?

All deregulating industries share the same lesson: profits eventually decline, leading to consolidation. Electric utilities are no different.

New business opportunities, improved internal communications, and energy information services: three solid reasons electric utilities should form a telecommunications strategy (if they haven't already). Yet, while these motivations are compelling, none really demands utility participation.

The Michigan Public Service Commission (PSC) has set rates and charges for delivery service for a five-year experimental retail wheeling program involving Detroit Edison Co. (DE) and Consumers Power Co. (CP). The program will be implemented the next time the utilities solicit new capacity (Case No. U-10143/10176). The ruling follows an April 11, 1994, PSC order approving the framework for the retail wheeling experiment. The rates pertain to industrial customers with 5 megawatts of retail delivery capacity that use about 3 million kilowatt-hours (Kwh) of electricity per month.

is Never Lost

In spite of ample arithmetical examples, the basic point made by Lawrence Kolbe and William Tye in "The Cost of Capital Does Not Compensate for Stranded-Cost Risk" (May 15, 1995) is simply wrong. The authors claim that "even if the cost of capital [reflects] full knowledge of the risk of stranded costs," it will not compensate for that risk.

Last year was pivotal for nuclear power. On May 13, 1994, the board of directors of the Washington Public Power Supply System (WPPSS) voted 9-4 to terminate reactors WNP-1 and WNP-3, triggering a dismantling of the two mothballed reactors, both about 70 percent complete. For ratepayers in the Pacific Northwest, the decision offered no relief from bills for construction of the two plants (em recently estimated at about $350 million per year for the next 24 years1. In many ways, WPPSS and its troubled history is a microcosm of the U.S.

The electric utility industry is undergoing its most profound change since Thomas Edison and George Westinghouse battled over whether the American power system should be AC or DC. In essence, that technological choice shaped the industry we know today. Edison's low-voltage, DC system would have required many small generating stations and short distribution lines. The high-voltage Westinghouse AC system promoted development

of long-distance transmission networks that deliver electricity efficiently from large, remote power plants.

Up until now, cost-of-service ratemaking has provided relatively stable rates, while enabling utilities to attract enormous amounts of capital. Of late, however, regulators appear to be heeding the argument that changing markets warrant a second look.

federal-state tensions currently affecting energy regulatory policy in America.

Sen.