Vermont PSB continues alternative regulation plan

Weekly Update Courtesy of Utility Regulatory News #3969: Endorsing the price cap form of regulation for an electric utility, the Vermont Public Service Board has determined that the utility had been able to strengthen its financial position as a result of its alternative regulation plan (ARP).

The board found that the utility, Green Mountain Power Corp., had instituted an ARP that was in the best interests of its ratepayers and that the ARP, as compared to traditional cost-of-service rate making, allows the utility to respond more quickly and effectively to changes in operating costs. Nevertheless, the board agreed that some updating was needed. To that end, the board authorized both the retention of the salient features of the utility’s existing ARP and the addition of certain new provisions. One of the terms kept from the current plan is an annual adjustment to the utility’s rate of return on equity (ROE) based on yields from 10-year Treasury notes. However, the new plan offers a revised performance-based adjustment for ROE, under which Green Mountain Power’s efficiency and productivity will be measured against a benchmark group of utilities. The updated ARP also includes an inflation-adjusted capping mechanism for non-power costs, whereas the existing plan relied on a fixed dollar ceiling for such costs.

The board deemed the ARP changes appropriate given the collective experience of electric utilities operating under ARPs in the state. In the board’s view, the modified plan will facilitate more accurate capture of the impacts of inflation over time.

Observing the continued volatility in both energy and financial markets, the board ruled that such inflation adjustments marked a significant improvement in the utility’s ARP. For the full story, Subscribe to URN.

Posted: June 9th, 2010 under Uncategorized, efficiency, finance, green energy, regulation, renewables.
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PSC says state’s consumers bear unfair burden

Weekly Update Courtesy of Utility Regulatory News #3969: Pointing to long-standing problems with cost allocations among the various operating companies of the Entergy Corp., the Arkansas Public Service Commission has again exhorted Entergy Arkansas, Inc. (EAI) to spin itself off from its parent company and become a stand-alone entity.

The commission had first raised the prospect of such a move in February 2010, when it initiated an investigation into EAI’s possible withdrawal from the Entergy operating system. The commission indicated that it would like to see EAI serve as an individual utility and join either the Midwest ISO or the Southwest Power Pool. Although EAI’s president had offered assurances at a recent PSC hearing that EAI was seriously examining the option of restructuring as a stand-alone company, the commission noted that reports in the press and public statements from EAI appeared to show otherwise.

The commission expressed concern that maintaining the status quo places Arkansas ratepayers at a disadvantage because a disproportionate amount of common costs from Entergy’s systemwide operations are assigned to EAI. Citing figures showing that Arkansas ratepayers have subsidized Entergy customers in other states by more than $4.5 billion in the last 20 years, the commission asserted that a spin-off of EAI as a stand-alone entity would be the best way to assure that such improper cost allocations do not continue. For the full story, Subscribe to URN.

Posted: June 9th, 2010 under M&A, Uncategorized, finance, regulation, transmission regulation.
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S.C. Supreme Court denies appeal of PSC decision

Weekly Update Courtesy of Utility Regulatory News #3969: Finding that the state legislature had designated the South Carolina Public Service Commission (PSC) as the proper agency to administer and enforce the state’s Base Load Review Act (BLRA), and discovering nothing arbitrary or capricious in the commission’s interpretation of that law with respect to an electric utility’s application for authority to construct a new nuclear generating unit, the South Carolina Supreme Court has affirmed the PSC’s conclusion that the nuclear power project could go forward.

The commission’s decision allowing South Carolina Electric & Gas Co. to proceed with a nuclear joint venture with the state-run South Carolina Public Service Authority had been challenged by an environmental group, Friends of the Earth, who alleged that because the proposed nuclear plan represented the first time the PSC had invoked the terms of the BLRA, its decision thereunder should be subject to “heightened scrutiny” by the court. The group also argued that the particular nuclear technology being proposed was beyond the utility’s means and that the utility had failed to fully analyze alternatives, such as enhanced demand-side management programs and power purchased from renewable resources.

After reviewing the record as a whole, however, the court said that there was ample evidence that the utility had adequately considered other alternatives to the nuclear option and also had looked at competing technologies. Accordingly, the court ruled that the appellant had made no showing that the commission’s BLRA analysis had been mistaken or an abuse of discretion. Given the PSC’s expertise in such matters, and the legislature’s clear signal that the commission was to be the lead agency in effectuating the act, the court declared the commission’s decision approving the nuclear project to be “presumptively correct,” and it declined to substitute its judgment for that of the commission’s. For the full story, Subscribe to URN.

Posted: June 9th, 2010 under Uncategorized, green energy, nuclear renaissance, regulation.
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A bipartisan group of lawmakers this week introduced the Electric Drive Vehicle Deployment Act of 2010, aimed at propelling deployment of EVs and related infrastructure. The bill — sponsored by Senators Byron Dorgan (D-N.D.), Lamar Alexander (R-Tenn.) and Jeff Merkley (R-Ore.); and Representatives Ed Markey (D-Mass.), Judy Biggert (R-Ill.), Jerry McNerney (D-Calif.) and Anna Eshoo (D-Calif.) — proposes to earmark $800 million in grants to help five communities install charging stations and incentivize EV purchases. It also would extend existing federal tax credits for individuals buying EV and charging system purchases.

“The auto industry is moving quickly to meet customer demand for more efficient vehicles that cost less to fuel up,” stated Rep. Biggert. “But our electric transportation infrastructure must keep pace with the technology.”

The bill also would seek to establish “best practices” in deploying EV infrastructure across the country. The bill’s sponsors cited EVs’ prospects for reducing dependence on imported oil, and also cutting greenhouse gas emissions.

“The goal should be to electrify half of our cars and trucks within 20 years,” stated Sen. Alexander.-MTB

Posted: May 28th, 2010 under Uncategorized, climate change, electric vehicles, energy policy, smart charging.
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Weekly updates courtesy of Utility Regulatory News #3968

Although authorizing additional revenues of almost $3.5 million for a natural gas local distribution company, the Arizona Corporation Commission has instructed the company to provide supplemental funds for certain of its low-income ratepayer assistance plans, so as to mitigate the impact of the rate increase on its more vulnerable customers during the ongoing economic recession.

Citing the effects of a customer base that varies seasonally, and purporting to have experienced negative growth during the test period, the company, UNS Gas, had requested an increase of nearly $9.5 million and a rate of return on equity (ROE) of 11%. The company averred that the 11% ROE was reasonable given the business risks experienced by a group of comparable firms. The commission, however, deemed the company’s selected proxy group to be flawed in that it looked to the general business world rather than similarly situated utilities. The commission thus found the company’s risk assessment to have been overstated, noting that utility services are not discretionary for consumers and remain fairly stable even during economic downturns.

By the same token, the commission declared the company’s projected number of customers to have been understated. According to the commission, the company’s rate of growth may have slowed, but it was still growing nonetheless. The commission therefore settled on a 9.5% ROE for the company. Moreover, finding that customers with modest means have been more affected by the poor economy than has been the company, the commission ordered the company to 1) increase spending on various low-income weatherization initiatives; 2) add to its bill paying assistance funds; 3) increase the income eligibility level for certain programs; and 4) refrain from increasing the monthly customer charge for qualifying low-income plan participants. Subscribe to URN for the full story.

Posted: May 26th, 2010 under Uncategorized, natural gas, regulation.
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