Maryland Public Service Commission

How can decision makers determine the appropriate degree of ring-fencing for a utility holding company? The authors propose a systematic and objective method – recognizing business and financial risks specific to the regulated utility and its affiliates.

The latest dispute over PJM’s bidding rules has raised the level of uncertainty in organized electricity markets. Efforts at reform have created a market structure so jumbled that it can’t produce just and reasonable rates -- or assure adequate supply resources. It’s time for FERC to consider alternative approaches to market design.

The advent of smart grid technology has raised new and challenging issues concerning data privacy. Of course, data privacy isn’t a new concern for the energy industry, as utilities have always collected customer data, some of which is common to any business, such as contact and credit information, and some of which is unique to the energy industry, such as usage and demand data.

The electric utility industry offers up a wealth of ideas on how the Federal Energy Regulatory Commission might reform its policy, adopted under FERC Order 679 in 2006, of granting financial incentives for investments in transmission line projects that ensure reliability or mitigate line congestion so as to reduce the cost of delivered power. Fortnightly’s Bruce W. Radford reports.

Investors historically have been skeptical about merger synergies in utility mergers, assuming that regulators will insist that most or all economic benefits flow to customers. However, recent transactions suggest utilities are taking a different approach to valuing synergies that might strengthen the case for mergers — not just for the merging parties, but also for investors and regulators.

Generators and demand-response providers are reaping rewards in forward capacity auctions, causing suppliers to go shopping for the most lucrative markets. Now the Midwest ISO is trying to catch up, by proposing its own auction for years-ahead resource bids. But does RTO shopping serve the interests of customers, who are legally entitled to rates that are just and reasonable? Why are some state policy makers advocating a return to old-school RFPs for long-term contracts?

Strict adherence to cost-of-service ratemaking led to what might be considered a Luddite decision in the Maryland PSC’s initial rejection of BGE’s smart-grid filing. More than 60 years ago, the U.S. Supreme Court ruled that ratemaking calls for “pragmatic adjustments” to regulatory policy, toward the goal of sensible and effective rate orders. Delaying modernization doesn’t serve the aims of customer choice, conservation or electric system efficiency.

The industry might be overlooking a source of capital for smart-grid and similar investments. Funds collected in depreciation accounts for cost-of-removal liabilities could finance capital spending projects.