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Mail

IN ACCORDANCE WITH OUR PREVIOUS DISCUSSIONS. we understand that the City of Alameda, Calif. and our municipal utility, the Bureau of Electricity are to be featured in an article to be published in your September edition. The article is being prepared by Mr. Len Grzanka, a local freelance writer, and is to discuss municipal telecommunications ventures. Based on recent staff discussions with Mr. Grzanka, we have some concern that Alameda's situation be represented accurately.

News Digest

State PUCs

ISO GUIDELINES. Marking a contrast with California, but lining up with states in the Northeast, the Iowa Utilities Board has urged that independent system operators should have authority to order redispatch to help fulfill service requirements for electric transmission. That rule came as part of a set of principles issued by the board to guide the formation of ISOs in managing electric transmission systems and preventing the exercise of market power.

Frontlines

"THESE ARE THE DOG DAYS OF DEREGULATION." That's how Federal Energy Regulatory Commission chairman James Hoecker put it last month in Houston at his luncheon talk at the Sixth DOE/NARUC National Electricity Forum. He bemoaned the "evidence of delay" in restructuring that now "clearly exists."

Don't be fooled. What Hoecker has up his sleeve is nothing less than a full-scale overhaul of FERC Orders 888 and 889.

Price Forecasting in Spot Markets: Hidden Risks in Single-Part Bidding

The California Power Exchange doesn't solicit separate bids for plant start-up, spinning reserve or base load operation. That can make spark spreads a bit misleading

IT SHOULD COME AS NO SURPRICE THAT THE PROSPECT OF electric competition has created a huge demand for price forecasting services. To their credit, the forecasters have obliged, supplying an abundance of tools and techniques. Do the forecasts serve the needs of those who would use them?

Some might wish to use a price forecast to assign a value to assets.

Mail

I READ WITH INTEREST THE ARTICLE "TIME'S UP FOR PUBLIC Power," in the July 1 edition of your publication, written by Charles Bayless, the former CEO of Tucson Electric Power Co. (and now CEO of Illinova - Ed.). Particularly striking was the sidebar on page 34, which accuses the Western Area Power Administration, a power marketing administration within the Department of Energy, of hiding costs and inappropriately handling a number of financial issues such as depreciation. I welcome the opportunity to respond to this misinformation.

News Digest

FERC

GAS PIPELINES. Noting a move toward shorter-term contracts since Order 636, the FERC on July 29 issued an "integrated package" of reform proposals for the natural gas pipeline industry: (1) specific measures in a notice of proposed rulemaking on short-term transportation (transactions shorter than one year); plus (2) an open-ended request for comments in a broader notice of inquiry. RM98-10-000, 84 FERC ¶61,985 [NOPR]; RM98- 12-000, 84FERC ¶61,087 NOI].

Special Report

FORCING A DIVESTITURE SHOULD REMAIN AN OPTION for regulators in a clear case of market power abuse, NARUC members have agreed.

NARUC's executive committee also has opened discussion on a five-year business plan that would increase the association's visibility, improve its technology and make better use of the $10 million it has in reserves.

Members at the National Association of Regulatory Utility Commissioners summer meetings in Seattle, Wash., asked states to give them "clear and adequate authority" to protect consumers from market power.

Perspective

Efforts to make generation competitive have induced several electric utilities to sell their power plants. Some sales are voluntary. Some are forced by rules mandating functional segregation from transmission and distribution. Of those sales announced or completed, most have involved high-cost utilities, and all have garnered at least book value, suggesting an attempt by sellers to deal with stranded costs.

Why then, are buyers willing to pay more than book value? They must believe they can improve on cash flows - either by raising revenues, trimming costs, or both.

News Digest

Business Wire

William Catacosinos has resigned as chairman of MarketSpan Corp., the utility formed to replace the troubled Long Island Lighting Co. Catacosinos is under investigation by the New York attorney general due to a $42-million severance payment as part of the buyout of LILCO by the New York government-run Long Island Power Authority (see Public Utilities Fortnightly, August 1998, p.28).

SCT Utility Systems Inc., signed a software and services agreement worth about $13 million with the city of Seattle for the BANNER Customer Management System.

Benchmarks

THE LIST OF COMPANIES STUNG BY RECENT ELECTRICITY. price spikes in he Midwest continues to expand, as cries for price caps grow loader. Much has been said of the dollar amounts lost and who has incurred those losses; yet few have questioned the fundamentals driving this market. Understanding what's behind the recent market uproar is the first step in deciding how well the market functions.

Regulators should be careful not to slow the restructuring process simply because of this price volatility, but they should pay very close attention to its causes.