But expresses concern about ongoing consolidation in the energy sector

Update courtesy of Utility Regulatory News #4059: Although conditionally approving the proposed acquisition of Constellation Energy Group (CEG) by Exelon Corp., the Maryland Public Service Commission let it be known that it was doing so with some trepidation. The commission said that while It harbors some reservations about the merger, it simply had no legal grounds for denying the plan. The commission observed that both federal and state law facilitate such transactions and that the Exelon/CEG joinder is in keeping with other mega-mergers of energy companies announced in recent years. Nevertheless, the commission voiced some apprehension about the plan, and cited the fallout in the banking industry, where over-consolidation among financial institutions created companies that were “too big to fail,” but failed nonetheless. In an effort to avoid similar pitfalls in the Exelon/CEG arrangement, the commission said it was making its approval of the merger contingent on certain actions. Chief among the conditions is a $100 rate credit for every residential customer of CEG’s operating subsidiary, Baltimore Gas & Electric Co. (BGE). Exelon also was instructed to maintain BGE’s corporate headquarters in Maryland, to keep BGE employment numbers at existing levels for a minimum of two years after consummation of the merger, to develop new sources of Maryland-based generating capacity, and to invest in Maryland-specific energy-efficiency, low-income assistance, and charitable and civic programs. Given Exelon’s operations in Illinois and Pennsylvania and the possibility that it may in the future wish to add yet other utilities to its corporate family, the commission said it could not help but worry about where BGE operations would appear on Exelon’s priority list. Consequently, the commission said that the conditions and ring-fencing measures it was attaching to its approval were critical for safeguarding the public interest on a post-merger basis. For the full story, subscribe to URN.

Posted: February 28th, 2012 under M&A.
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Agrees that all SEMA members must pay for Cape Cod reliability

Update courtesy of Utility Regulatory News #4059: The U.S. Court of Appeals for the District of Columbia Circuit has refused to overturn orders from the Federal Energy Regulatory Commission (FERC) that had declared reasonable a regional transmission organization’s (RTO’s) practice of requiring all participants in the Southeastern Massachusetts (SEMA) wholesale electric market to help underwrite back-up service for Cape Cod. The appellants were a group of municipally owned electric utilities who claimed that the local RTO, the Independent System Operator of New England (ISO-NE), had unfairly required the municipals to pay for auxiliary power supplies for Cape Cod. The municipals, led by Braintree Electric Light Dept., had argued that  it was inequitable for them to be charged by ISO-NE for reserve capacity for Cape Cod because the subject power supplies were uneconomic and because none of the municipals were located on the Cape or were serving any customers on the Cape.  The municipals pointed out that their operating characteristics for service to the mainland were quite different from those of the entities serving Cape Cod, which differences they said justified a FERC order directing ISO-NE to either exempt the municipals from the Cape Cod-related charges already instituted or to divide SEMA into separate Upper (mainland) and Lower (Cape Cod) subdivisions. The FERC, however, had turned down both requests, explaining that ISO-NE’s tariffs were not unduly preferential and that the changes sought by Braintree and the others could cause service reliability on Cape Cod to be seriously degraded. Upon appeal, the court found that the FERC had properly interpreted both the RTO’s tariffs and an associated settlement agreement pertaining to Cape Cod. The court stated that the FERC had reasonably resolved the municipals’ claims and had reasonably construed the stipulation. For the full story, subscribe to URN.

Posted: February 28th, 2012 under energy markets, regulation, reliability.
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Deems public utility moniker inapplicable, special rates unnecessary

Update courtesy of Utility Regulatory News #4059: Although not disputing that there is growing interest in electric vehicles (EVs), the Oregon Public Utility Commission has ruled that the EV industry remains in a nascent stage such that there is no need for the commission to exercise the full extent of its regulatory authority over EV-related services. In particular, the commission held that independent, nonutility electric vehicle service providers (EVSPs), such as those offering charging services at public locations, should not be classified as public utilities. The commission reported that state law specifically exempts from the definition of a public utility an entity that sells electricity for use as a motor fuel. Moreover, the commission said, neither do EVSPs fall within the category of an electric service supplier under state statutes, in that EVSPs do not themselves generate the power they sell. As to setting special rates for EV charging stations, the commission averred that EVs are not yet on the road in sufficient numbers to warrant a mandate that electric utilities devise EV-explicit rates or a separate EV rate class. However, the commission urged utilities to educate consumers about the advantages of time-of-use (TOU) pricing and to encourage EV customers to migrate to TOU schedules. The commission added that while it was not requiring utilities to develop EV-specific rates, it did believe that electric utilities should refine their existing integrated resource plans (IRPs) so as to take into account likely future increases in demand for flexible capacity. The commission therefore instructed the utilities to revisit their IRPs and revise them as needed to accommodate projections of future EV needs. For the full story, subscribe to URN.

Posted: February 28th, 2012 under electric vehicles, regulation.
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Issues first-ever combined license for additional reactors in Georgia

Update courtesy of Utility Regulatory News #4058: Although not a unanimous decision, the Nuclear Regulatory Commission (NRC) has voted to grant a license to the Southern Nuclear Operating Co. for the construction of two new nuclear generating units at the company’s existing Plant Vogtle campus near Waynesboro, Ga. The NRC’s action marks the issuance of a formal license for a new nuclear energy facility in this country in more than three decades and is even more noteworthy for being the first time the NRC has approved the issuance of a combined license. In authorizing the proposed Vogtle expansion project to go forward, the majority of the NRC commissioners found that the company had incorporated sufficient safeguards in its design plan to assure the public health and safety, concerns raised about nuclear power following last year’s earthquake in Japan notwithstanding. NRC Chairman Gregory B. Jaczko dissented, however, explaining that he did not believe the plans for the new Vogtle units had adequately addressed the lessons learned from the post-earthquake meltdown of the Fukushima nuclear plant in Japan. Chairman Jaczko said it was with “great disappointment” that he was declining to join his fellow NRC members in voting for the project, and he stressed that he remains a strong proponent of nuclear power. Nevertheless, given the fact that the events surrounding Fukushima continue to be studied and analyzed, he posited that further safety mechanisms and precautionary measures are likely to be identified in the future, making it premature to proceed with the new Vogtle plants at the present time. For the full story, subscribe to URN.

Posted: February 23rd, 2012 under generation, nuclear.
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Finds no support for equity component adopted by PUC

Update courtesy of Utility Regulatory News #4058: Describing as both unreasonably low and unsubstantiated the equity ratio the Rhode Island Public Utilities Commission (PUC) had used in setting new rates for an electric utility, the Rhode Island Supreme Court has partially vacated the PUC’s decision and has ordered the commission to revisit the capital structure issue. The utility, Narragansett Electric Co. d/b/a National Grid, had applied for more than $75 million in rate relief, based in part on a then-hypothetical capital structure composed of 50.05% equity and the rest debt. The commission, however, had limited the utility to a rate increase of a little less than $16 million, predicated in large part on its rejection of the proffered capital structure and its use instead of a model containing only 42.75% common equity. In appealing the PUC’s rate order, National Grid pointed out that no party had recommended such a low equity ratio and that the record showed no testimony or discussion of any equity level lower than 45%. Observing that the equity ratio relied upon by the commission was that of the utility’s twice-removed, foreign-based parent company, the utility argued that there was no evidence that such a tenuously connected capital structure was appropriate for the utility itself. The court agreed that there was no evidentiary foundation for the PUC’s conclusion that the capital structure of the utility’s distant parent company, headquartered in the United Kingdom, was a proper proxy for National Grid. Moreover, citing the fact that National Grid has an actual capital structure of its own separate and apart from that of its ultimate parent, the court questioned the need to use a proxy in the first place. It therefore instructed the PUC to reconsider the capital structure matter. For the full story, subscribe to URN.

Posted: February 23rd, 2012 under finance, ratemaking.
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