S&P

Rate Unbundling: Are We There Yet? A Reality Check

In an article entitled "Rate Unbundling: Are We There Yet?" (PUBLIC UTILITIES FORTNIGHTLY, Feb. 15, 1996, p. 30), authors Susan Stratton Morse, Meg Meal, and Melissa Lavinson urge regulators to unbundle the cost of capital to recognize that the business risk of electric generation exceeds that of transmission and distribution (T&D).

Stranded Costs: Is the Market Paying Attention? (A Look at Market-to-Book Ratios)

Investors are taking stock

of utility exposure to price competition.The utility trade press and even the general financial press have featured the views of regulators, utility executives, legislators, and various consumer advocates on the stranded-cost question. Stranded costs easily represent the most contentious issue facing the electric industry as it moves to an era of competition.

Purchased Power Contracts: Marrying Production and Financial Efficiencies

Electric utilities incur indirect financial costs when they turn to unregulated generators (NUGs) to buy power. These indirect costs can lead to lower bond ratings and undermine competitive advantage, depending upon the type of contract.

In this case we analyzed the combined effects of NUG power purchases on generating and capital costs for a representative utility (Utility A) with a relatively large amount of NUG purchased power.

Midwest ISO Would Link ECA, MAIN

Six midwestern utilities have agreed to establish an independent system operator (ISO) to ensure nondiscriminatory open access to their combined bulk-power transmission systems.

Plans for the "Midwest ISO" should be filed at the Federal Energy Regulatory Commission (FERC) late in 1996. Members include American Electric Power Co. (AEP), Centerior Energy Corp., CINergy Corp., Detroit Edison Co., Northern Indiana Public Service Co., and Wisconsin Electric Power Co.

Bright Outlook for Muni Credit Ratings

Standard & Poor's (S&P) has issued its first quarterly report on public power and rural electric cooperatives: Muni Utility Ratings: 1995, 1996, and Beyond. The report predicts that the shakeout in credit quality that has characterized the municipal utility industry since 1993 will continue in 1996. Downgrades and negative outlook assignments will continue to outpace positive ratings actions, but not at the 1995 rate.

S&P Wary of CPUC Restructuring

Standard & Poor's (S&P) plans to maintain negative outlooks on the three largest California electric utilities (em Southern California Edison (SCE), San Diego Gas & Electric (SDG&E), and Pacific Gas & Electric (PG&E). Although it considers the California Public Utilities Commission's (CPUC's) December 20 electric restructuring order "reasonably favorable," S&P will not reexamine the ratings until it is sure the plan will be finalized as proposed. S&P's concern is that some members of the California State Senate believe small customer interests would not be adequately protected.

FERC Oks Steuben Storage Field

The Federal Energy Regulatory Commission (FERC) has issued a certificate allowing Steuben Gas Storage Co. (SGS) to construct and operate an underground natural gas storage field, the Thomas Corners Field.

In a preliminary finding that SGS lacked market power, the FERC authorized the company to charge market-based rates, subject to reexamination (Docket Nos. CP95-119-000 et al.).

Rural Electric Tries a Little English

"Anyone who assumes rural electric cooperatives will not be fully engaged in whatever system we have . . . if they assume the more competitive it becomes, the less we'll be engaged . . . they're very wrong."

(em Glenn English, CEO,

National Rural Electric

Cooperative Association

Ten terms as a U.S. Representative from Oklahoma's Sixth District taught Glenn English how to build consensus.

The Year Ends With a Bang

Public utility stocks showed no signs of letting up during the fourth quarter of 1995. The Public Utilities Stock Index rallied a brisk 234.66 points, or 6.38 percent, to close at 3910.01. Not to be outdone, the Dow Jones Industrial Average gained 355.86 points, or 7.47 percent, to close at 5117.12, and the S&P 500 Stock Index climbed 34.21 points, or 5.88 percent, to close at 615.93.

Certain stocks sparkled more than others:

SCANA Corp.

S&P Investigates Effects of Competition

Standard & Poor's (S&P) has released a survey of 90 state regulators and their opinions on electric utility deregulation, conducted by RKS Research and Consulting. S&P intends to use the survey to assess the "nonquantifiable risks and opportunities" of competition.

The study found that state regulators and staff do not fully support stranded-cost recovery through cost allocation at the state level. Regulators would prefer to share stranded costs among large customers, small commercial and residential customers, and shareholders.