U.S. Department of Energy

WHEN LAST I HEARD, U.N. SECRETARY GENERAL Kofi Annan had reached agreement with Iraqi President Saddam Hussein on weapons inspections, staving off war. But the American Gas Association is still battling the electric industry and the U.S. Department of Energy to save market share for its gas-fired water heaters. This battle is serious.

The water heater war takes in a wide range of issues and players. I hear that ASHRAE (the American Society of Heating, Refrigerating and Air-Conditioning Engineers), has raised gas industry ire with its new proposed standard 90.1.

THE CALIFORNIA DEBATE OVER ELECTRIC RESTRUCTURING IS now nearly four years old. And though it is nearing its final stages (the opening is now set for March 31), some of the most important questions as to how this will work in practice are just emerging.

The original bargain had called for the state's three large investor-owned utilities to vest basic control of their transmission networks in the new independent system operator in exchange for maintaining combined ownership of generation and transmission assets (and for a good level of assured stranded cost recovery).

POWER DISTURBANCES COST U.S. ELECTRIC CUSTOMERS about $26 billion each year: nearly three times the anticipated annual saving from deregulation.

Competition and restructuring will only turn up the pressure, as the grid carries more low-cost power over longer distances to a wider variety of customers.

Already we are seeing a rapid rise in wholesale power transactions. Some utilities now complete as many such transactions in one day as they previously made in one week. Overall, the value of wholesale transactions has increased fourfold over the last decade.

A SUNDAY AFTERNOON, NOT THREE WEEKS 'TIL CHRISTMAS, and I was holed up at Washington's Mayflower Hotel, attending a workshop (no Santa, no elves) on electric transmission pricing.

I wasn't alone, however. At least 200 others had filled the hotel's East Room near to capacity to hear about such topics as nodes, zones, access charges and load duration curves. The 5th National Electricity Forum, sponsored by the U.S. Department of Energy and the National Association of Regulatory Utility Commissioners, was under way.

AS U.S. ELECTRICITY MARKETS BECOME increasingly competitive, large industrial customers will discover many new choices. These choices include the opportunity to modify the amount and timing of electricity use in response to prices that vary from hour to hour. In addition, customers can sell certain electricity services, including operating reserves and load following, to the system operator. And industrial customers with cogeneration facilities can participate fully in bulk power markets, buying and selling energy and ancillary services in response to changes in spot prices.

Aquila Energy, a subsidiary of UtiliCorp United, has hired David H. Stevenson former marketing v.p. of Duke/Louis Dreyfus, as v.p. power marketing for its mid-continent and western regions.

Charles Falcone, who retired as American Electric Power's system power markets senior v.p., was named project managing director of the New York State Power Pool's Independent System Operator. Falcone served as an official with the U.S. Department of Energy for several years before joining AEP.

Ohio Electric Utility Institute has elected William J. Grealis as board chair and president.

The overwhelming impression is one of growth (em in volume and in the number of participants.

The early 1990s was an anxious period for advocates of emissions trading. Concerns about whether the sulfur dioxide allowance market would ever develop tempered the heady success of the first national emissions trading program implemented by the Environmental Protection Agency under the Clean Air Act Amendments of 1990, Title IV. These concerns were heightened when in May 1992, Wisconsin Power & Light traded 10,000 allowances to the Tennessee Valley Authority.

Minnesota has lots of drafts, but no final plan.

So you think your state has been busy? In Minnesota, the 1997 legislative session saw more than a dozen new bills introduced on electric, gas and energy issues.

At the start of the session many expected that electric deregulation would play a major part in the legislative program. However, Gov. Carlson reports now that legislators will defer work on the issue until the 1998 session. Several electric industry deregulation bills were introduced at the end of the session, but when last we checked no hearings had been held.

Speaking on June 11 in Washington, D.C., at a symposium sponsored by the Institute of Electrical and Electronics Engineers, Rep. dan Schaefer (R-Colo.) was heard to say that he would have his electric restructuring bill out of committee by the end of July. He said his bill would mandate electric competition by 2000--just the sort of deadline that Texas Public Utility Commission Chair Robert Gee likes to call a "Hong Kong" clause.

Will the millennium bring the dawn of customer choice? Here we are, halfway through 1997. Hong Kong is now Chinese, but in America we are still ratepayers.

Dominion Resources touts its "impacted" method, but opponents call it a "stalking horse" (em a scheme to avoid full review at FERC.

Is the Federal Energy Regulatory Commission prepared to accept true marginal-cost pricing for electric transmission?

With all the criticism leveled at the traditional "contract path," one would think that the FERC would consider a new approach to transmission pricing.

In fact, last year in its final Order No.