Federal Energy Regulatory Commission

THERE IS MUCH TALK ABOUT CONVERGENCE.

The Federal Energy Regulatory Commission asks, "What needs to be done to enable the gas and electric markets to work together to become more integrated?" The real question is more direct: "How can the gas industry transform what is presently, at best, a daily market, with daily procedures, to an hourly or quarter-hourly electric generation business and gain benefits at the same time?"

Will the answer come from hourly gas trading and pricing?

The Federal Energy Regulatory Commission has ordered natural gas producers in Kansas to refund to customers approximately $500 million for erroneously adding the state's ad valorem tax onto interstate rates.

In its Sept. 10 ruling, the FERC said such taxes are not eligible for rate recovery under the Natural Gas Policy Act of 1978 and, following court directive, ordered the customer refund. (See, Docket Nos. rp97-369-000 et al.).

The refund covers gas produced from October 1983, when the petition challenging the add-on tax originally was filed at the FERC, until June 1988.

New England Power Co. has agreed with 17 parties, including government agencies and conservation groups, on the relicensing of the Fifteen Mile Falls hydroelectric project on the Connecticut River.

New England Electric System President and CEO John W. Rowe, Gov. Howard Dean (D-Vermont) and Gov. Jeanne Shaheen (D-N.H.) signed the agreement.

The agreement governs requirements for a new, 40-year license for Fifteen Mile Falls, the largest conventional hydroelectric project in New England.

The Federal Energy Regulatory Commission has ruled that all electric power sales into the California power exchange are to be treated as wholesale power sales under Federal Power Act Sec. 201, and for the purpose of qualifying under the definition of "exempt wholesale generator," as defined in Public Utility Holding Company Act of 1935. (See, Docket No. el97-36-000.)

The September 10 ruling was made in response to a request by Southern California Edison, which plans to divest all its fossil-fueled electric generation plants.

The Federal Energy Regulatory Commission has moved closer to deciding the stranded cost dispute between Consumers Energy and the city of Alma, Mich., which intends to construct its own municipal electric system.

On Sept. 10, the FERC set for hearing two stranded cost issues: (1) whether Consumers Energy has met the "reasonable expectation" standard justifying stranded cost recovery from Alma; and (2) if so, what amount the utility may recover. (See, Docket No. sc97-4-000.)

Consumers Energy wants $56.1 million in stranded cost payments from Alma.

The Federal Energy Regulatory Commission invited industry representatives to Washington, D.C., in July to talk about the electric utility industry's implementation of OASIS, or open-access, same-time information system, which is used to monitor and schedule electric transmission capacity.

It ended up with an earful about problems on the on-line system.

Gerry Cauley, of the industry's volunteer "How Working Group," said, "Overall, the OASIS does provide comparable access," and the system is seeing reservation activity at expected levels.

With benefits unclear, PUCs will "go slow."

California, New Hampshire, Massachusetts, Nevada, Pennsylvania, Rhode Island, and Vermont have given customers the right to choose their electric providers.

Other states are considering similar legislation.

In Congress, U.S. representatives Schaefer (R-Colo.), Markey (D-Mass.), DeLay (R-Tex.), and U.S. Sen. Bumpers (D-Ark.) and others have slapped bills on the table that would give choice to electric customers on a national scale.

Six out of eight members of the New York Power Pool have asked the Federal Energy Regulatory Commission to approve a request to provide electricity, installed capacity and ancillary services at market-based rates in the state's restructured market.

Included in the Aug. 15 filing are market power analyses for individual members and a plan for monitoring the proposed New York ISO. According to the utilities, the analyses demonstrate that the market under the proposed industry structure will be workably competitive. They also support the market-based rate proposal.

Let me tell a story. A consultant I know works as the lead negotiator for a Native American tribe that sells fuel to electric generating plants. On occasion he visits the reservation to discuss business plans with the tribe, exploring various scenarios for utility restructuring.

Recently, this consultant said he found himself in the ceremonial council lodge, instructing tribal leaders on decision trees and discounted cash flows. When he finished, the younger members conferred briefly in their native language.