Chapter Six - DEREGULATION
AND RESTRUCTURING
6.0 INTRODUCTION
Each of the preceding chapters has described background and key
elements of Nebraska’s consumer-owned electric systems as they currently
exist. This chapter examines the current status of electric industry
deregulation at the national and regional levels to place emerging issues
for Nebraska’s electric systems in context.
Deregulation of most major service industries such as
telecommunications, airlines, banking and natural gas has taken place
during the last two decades.1 The electric industry is viewed
as the last major service industry to be deregulated. The magnitude of the
changes involved in creation of competitive markets and restructuring of
electric companies dwarfs all other deregulation. No other industry
approaches the complexity of issues and the mount of capital in
transition.
Deregulation of the electric industry began with the passage of the
Public Utility Regulatory Policies Act in 1978.2 This
established the basis for independent, competitive companies to enter the
power generation business. During the 1980s, federal regulatory efforts
sought to enhance access to transmission lines for these new generators
and to help establish competitive wholesale markets. In 1992, passage of
the Energy Policy Act mandated broad open access to transmission lines and
encouraged greater competition in generation.3 The prospect of
competition at the wholesale level was then expanded by large power
consumers, independent producers, power marketers and others into
proposals to establish competition at the retail level as well. The
competitive market would theoretically provide every individual customer
with a choice of power supplier. The market would also theoretically lower
the retail price for each customer. However, it is possible that not all
customers would share equally in savings and some customers could witness
cost increases.
As currently envisioned, a system involving competition at the
wholesale and retail levels requires deregulation of generation,
establishment of regulated open access transmission operations and access
to customers at the distribution level. It also requires restructuring of
the electric industry from its current vertical structure which often
combines generation, transmission and distribution in a single company
into a structure with separate functional entities. It also requires
extensive changes in law and regulation, as well as utility operations and
financing.
At present, the federal government has left it to the states to
determine the timing and form competition will take. Nearly all states
have undertaken study or some form of action on this issue. However, there
is a growing debate over whether or not electric industry deregulation and
restructuring will bring benefits to consumers and how those benefits
might be assured. As of late 1997, nine states have passed legislation
with variant proposals to create competitive retail markets for
electricity. A few states have determined that such competition will bring
no apparent benefits to their consumers at the present time. Other states
are taking a cautious approach to examine proposals for retail
competition.
Policy deliberations in Nebraska may be shaped in part by the current
conditions in the state, by possible federal mandates and by the decisions
of other states in the region with whom the transmission grid is
interconnected. The purpose of this chapter is to review past and current
legislative efforts, federal regulatory actions and decisions,
restructuring activities in other states and issues and activities
associated with stranded cost, benefits and obligations. The chapter
concludes with a listing of issues for review in Phase II of the L.R. 455
study which will examine the implications of competitive electricity
markets for Nebraska. These issues are derived from Chapters 1 through 6
of this Phase I Report.
6.1 FEDERAL LEGISLATIVE AND REGULATORY ACTIONS
As noted above, federal legislative and regulatory actions have
prompted activity at the state level. Generally, federal actions set the
context for states to undertake legislation and regulation that addresses
their own particular conditions. With states moving forward on varying
schedules and with variant proposals for competition, there is some
pressure at the federal level to establish national requirements for all
states and date-certain timelines. This section briefly highlights actions
being undertaken at the federal level.
6.1.1 Public Utility Holding Company Act of 1935 (PUHCA)
As noted in Chapter 1, passage of the Public Utility Holding Company
Act in 1935 mandated the breakup of the major holding companies dominating
electric generation and supply nationally.4 The passage of the
act restructured the electric utility industry into its current form. It
allowed continued holding company operation only under strict terms and
conditions. For Nebraska, this broke the political influence of these
companies and set the stage for purchase of their operations by Consumers
Public Power District and the Omaha Public Power District.
Since the passage of the act in 1935, private electric companies have
mounted periodic efforts to amend or repeal PUHCA. Repeal of the act is
part of restructuring legislation being proposed. This is especially
significant in view of amendments that have been made to the act in recent
years and the wave of utility mergers and formation of new electric
holding companies currently underway. Critics of the act believe it to be
outdated and an obstacle to competition. Those opposing repeal believe
that premature removal of restrictions contained in the act could
undermine fledgling competitive markets by allowing a few large dominant
companies to gain market power. Repeal opponents urge that amendment of
PUHCA be viewed as part of comprehensive legislation on industry
deregulation and restructuring and not as independent legislation.
6.1.2 Public Utilities Regulatory Policy Act (PURPA)
As noted above, PURPA was passed in 1978 as part of the National Energy
Act. The principal policy objectives of PURPA involved energy
conservation, the development of equitable electricity rates and the
development of new, small capacity generation consisting of co-generation
and renewable power producers. PURPA established several standards which
could he adopted, modified or rejected by the appropriate state regulatory
body. Its provisions allowing competitive power generation by Qualifying
Facilities (QFs) help to set the stage for further deregulation in
wholesale markets.
Under PURPA, Nebraska’s consumer-owned systems were free to set their
own price for buying power from QF’s and those that set a price did so
based on avoided fuel costs which are low in Nebraska. In some states,
regulators required the avoided cost of future generation to be included
as benchmark price. Due in part to low purchase rates, Nebraska currently
has few QF’s. State’s such as California, for which state regulators
set high rates through an administrative process, ended up with a
significant number of contracts with above market rates which became a
driving force for deregulation and also efforts to repeal PURPA Section
210.
There are strong pressures for repeal of Section 210 of PURPA that
requires utilities to purchase the output of QF’s and instead allow the
market to determine what the price should be for the output. Although the
issue has relatively little current impact in Nebraska, it has strong
impacts on states such as California where there is substantial QF power
being produced. Those proposing repeal of Section 210 argue that it is
anti-competitive and the goals of PURPA have already been achieved. They
assert that renewable energy sources now have a foothold in the
electricity supply marketplace and that further promotion is unnecessary.
Those opposing repeal believe that the foothold renewable energy sources
currently have could be rapidly eroded in a competitive market and that
incentives are still needed to conserve energy and utilize alternative
fuels. Opponents to repeal of the law argue that PURPA should also be part
of comprehensive restructuring and deregulation legislation and not an
independent legislative effort.
6.1.3 The Energy Policy Act of 1992 (EPACT)
Federal Energy Regulatory Commission (FERC) efforts to open
transmission access on a case-by-case basis in the 1980s led to the need
for expanded authority to order transmission access outlined in the Energy
Policy Act of 1992. The Energy Policy Act of 1992 contained a total of 30
sections. Title VII - Electricity has led to new regulatory orders by the
Federal Energy Regulatory Commission (Orders 888 and 889 described below)
and provided the driving force for industry deregulation and
restructuring. It is important to note that the scope of EPAct is far
broader than Title VII and may lead to future legislation and regulation
in areas beyond restructuring of the electric utility industry.
The primary purposes of EPAct’s Electricity Title was to open and
expand the wholesale transmission market and encourage the development of
new competitive generating companies. It did not mandate retail
competition. The FERC is specifically prevented from ordering retail
wheeling in Section 722 of Title VII Subtitle B.5 FERC has used
its authority to urge states to move in this direction. In debates during
the past few years between the FERC and state regulators and others, FERC
commissioners have asserted that they already have regulatory authority
over the rates, terms and conditions of unbundled retail access under a
rationale that all electricity transactions have interstate implications.
State regulators and others question FERC’s authority over retail
issues. Retail competition has taken on a national debate of its own and
FERC authority may be modified and expanded to extend to jurisdiction over
the rates, terms and conditions of unbundled retail wheeling service in
the states which mandate retail competition or in federally mandated
retail competition. Further proposals for federal legislation, whether
individual or comprehensive bills, require monitoring,
6.1.4 Selected Bills (U.S. House and Senate) Introduced Since
1995
There have been numerous bills introduced in the U.S. House and Senate
since 1995 and several of the bills have similar or overlapping features.
Relevant bills introduced to date are listed below, including the pending
DOE/Administration bill which is currently circulating for agency review.
In a broad generalization, most bills introduced are intended to remove
what are perceived as statutory impediments to industry restructuring such
as PUHCA and PURPA restrictions; address retail competition and individual
consumer choice of a power supplier; offer implementation dates; provide
for state jurisdiction and market power issues; and offer protections for
consumers and the environment. Some bills are narrowly focused on a single
issue.
Full analysis and summary of possible impacts of these bills and
additional federal legislation on Nebraska will be undertaken in Phase II
of the L.R. 455 Study.
Bill Number |
Primary
Sponsor |
Introduced |
Purpose |
HR-310 |
Rep. Klug R-WI |
Jan 1995 |
Privatize PMAs |
S-299 |
Sen. Cochran R-MS |
Jan 1995 |
Amend FPA |
S-708 |
Sen. Nickels R-OK |
Apr 1995 |
Repeal PURPA |
S-1317 |
Sen. D'Amato R-NY |
Oct 1995 |
Repeal PUCHA |
S-1526 |
Former Sen. Johnston D-LA |
Jan 1996 |
Retail competition date |
HR-2562 |
Rep. Stearns R-FL |
Oct 1995 |
Repeal PURPA 210 |
HR-1801 |
Rep. Foley R-FL |
Jun 1995 |
Privatize Federal G&T assets |
HR-2929 |
Rep. Markey D-MA |
Jan 1996 |
PURPA/Retail competition |
HR-3172 |
Rep. Kennedy D-MA |
Mar 1996 |
Environment/competition |
HR-3601 |
Rep. Tauzin R-LA |
Jun 1996 |
Repeal PUHCA |
HR-3782 |
Rep. Markey D-MA |
Jul 1996 |
PUHCA/PURPA/FPA |
HR-3790 |
Rep. Schaefer R-CO |
Jul 1996 |
Comprehensive reform |
HR-4297 |
Rep. DeLay R-TX |
Oct 1996 |
Retail competition date |
HR-4316 |
Rep. Pallone D-NJ |
Oct 1996 |
Environment/competition |
S-237 |
Sen. Bumpers D-AR |
Jan 1997 |
Comprehensive reform |
HR-655 |
Rep. Schaefer R-CO |
Feb 1997 |
Comprehensive reform |
HR-1230 |
Rep. DeLay R-TX |
Mar 1997 |
Comprehensive reform |
HR-1960 |
Rep. Markey D-MA |
Jun 1997 |
Comprehensive reform |
6.2 FERC RULEMAKING AND DECISIONS
While new federal legislation is pending, states are attempting to
address federal regulatory rules and orders that have followed the passage
of the Energy Policy Act of 1992. The forms in which these rules are
enacted will shape some of the primary operational and functional
realities of deregulation and restructuring; setting a regional context in
which states may have to act.
6.2.1 FERC Orders 888 and 889
FERC Orders 888 and 889, issued in April 1996 to implement the
requirements of the Energy Policy Act of 1992, require all jurisdictional
transmission owners to provide nondiscriminatory open access to
transmission to all current and potential users. It is important to note
that FERC orders apply to "public utilities" that are generally
defined as private investor-owned companies under FERC’s jurisdiction.
Public power and rural cooperative systems in Nebraska are not currently
subject to FERC jurisdiction. However, because public power and rural
cooperative systems own transmission lines that are interconnected with
jurisdictional utilities and because they are members of regional power
pools (such as MAPP) they are impacted by the FERC orders.
FERC Order 888 addressed the twin issues of open access and stranded
costs. Fundamental to the current industry restructuring activities is the
requirement for functional separation, or "restructuring," of
transmission and generation in order to create open unbiased access of
generators to transmission services. Order 888 required that all
jurisdictional utilities: 1) separate transmission from generating,
marketing and communications functions; 2) file nondiscriminatory open
access tariffs containing minimum terms and conditions for use of
transmission lines; 3) take transmission service (including ancillary
service) for wholesale sales under the tariffs.
Order 889 addressed the development of a same-time information system
that would give existing and potential users of the transmission lines the
same access to information that the jurisdictional utility enjoys. This
became known as the Open Access Same-Time Information System (OASIS) and
Standards of Conduct Rule.
The legal and policy focus of these rides is to set the conditions for
competition and remedy undue discrimination in access to the
monopoly-owned transmission wires. A second critical aspect of the rules
is to address recovery of the transition costs of moving from a
monopoly-regulated regime to one in which all sellers can compete on a
fair basis and in which electricity is more competitively priced. FERC’s
goal is to eliminate the remaining patchwork of closed and open
jurisdictional transmission systems and ensure that all these systems,
including those that already provide some form of open access, cannot use
monopoly power over transmission to unduly discriminate against others.
While paving the way for new generating and marketing entities in
wholesale operations, the FERC Orders have created additional pressure at
the state level. Several of Nebraska’s public power utilities, for
example, are members of MAPP which has recently restructured its
organization and is currently considering measures to provide appropriate
non-discriminatory transmission tariffs and access through development of
one or more Independent System Operators for the MAPP region. This
activity has brought in a host of new players who intend to use the MAPP
system or will be affected by its rules, such as the public utilities
commissions in the MAPP region states. These activities are significant to
Nebraska because the evolution of open access transmission for wholesale
energy marketing may have significant direct and indirect impact on the
retail service of public power utilities in the state.
6.2.2 Implications of FERC Orders 888 and 889 for Nebraska
Nebraska did not face the same problems as utilities in other states
over transmission access in the 1980s. The state has had open access above
34.5kV for wholesale transactions for three decades.6
Nebraska’s pre-existing open transmission system, its geographical and
electrical position on the regional transmission grid and the low
generating costs of the state limited the state’s reliance on imported
power (except for WAPA preference power purchases). FERC’s efforts in
the 1980s had little impact on the state. FERC’s new authority, however,
coupled with deregulation and restructuring in neighboring states and
MAPP’s regional policies could have significant impact on Nebraska’s
transmission operations.
For example: FERC requires that a transmission owner construct
additional transmission if needed by parties requesting access.
Non-jurisdictional systems in Nebraska would apparently not need to follow
this requirement, although it may be mandated by MAPP policies required by
FERC. Further, non-jurisdictional consumer-owned utilities are currently
not required to file open access transmission tariffs that contain minimum
terms and conditions of non-discriminatory service. However, three of
Nebraska’s transmission owning systems have developed transmission rate
schedules and one (OPPD) has voluntarily filed a Pro Forma Open Access
Tariff with the FERC. MAPP might require further full filing of tariffs.
But even if these transmission problems are resolved by MAPP, there is an
additional question as to whether FERC has any reach into retail or
distribution level policies of the state where MAPP could not reach.
Pressure on Nebraska systems could rise with further rulemaking in
case-by-case actions at the FERC involving MAPP and utilities and utility
groups such as power pools in their efforts to comply with FERC orders.
The proposals in MAPP states, such as Wisconsin and other neighboring
states for formation of Regional Transmission Groups and Independent
System Operators to oversee transmission for the region require close
monitoring and analysis. Nebraska electric utilities and companies that
are members of the MAPP RTG include NPPD, OPPD, MEAN, LES, Hastings
Utilities and Tenaska (a private power marketer). Membership in the MAPP
RTG will allow access to the MAPP transmission network and tariffs. As of
late 1997, Nebraska utilities have not joined an ISO, although a MAPP ISO
is under development. Phase II of the study might examine a Nebraska
Independent System Operator along with regional and subregional
alternatives to identify relative advantages and disadvantages.
6.2.3 Mergers and Market Power
In addition to rising pressures in regulatory issues related to
transmission, there are also significant implications in the merger
activity underway in neighboring states. Mergers of major utility
companies in Iowa, Kansas and Wisconsin may hold far-reaching impacts on
competition in the region. Conditions placed upon mergers by affected
state public utility commissions and FERC may include participation in an
ISO organization to ensure that the possibility of utilizing transmission
by the merged company to achieve market power is reduced by not having
control of the operation of the transmission network owned by the merged
entities. FERC is currently reviewing its merger standards to determine
what, if any, additional safeguards are needed to protect consumers.
6.3 INDUSTRY RESTRUCTURING AND DEREGULATION IN OTHER STATES
Five of Nebraska’s neighboring states (Iowa, Missouri, Kansas,
Colorado and Wyoming) have undertaken study of the issue, but have taken
no other action to date. Among other states, restructuring legislation had
been adopted by late 1997 in California, Maine, New Hampshire,
Pennsylvania, Rhode Island, Oklahoma, Nevada, Montana and Massachusetts to
implement customer choice or retail competition.
In addition to the states that have enacted legislation, a few states
such as Idaho have deferred proposals for retail competition as not being
in the being in the best interest of their consumers at the present time.
Such action may indicate deferral of significant determination for the
present, or it may mark a more firm regulatory commission or legislative
committee stance opposed to opening of the retail systems.
6.4 STRANDED ASSETS, STRANDED BENEFITS, AND STRANDED
OBLIGATIONS
The establishment of competitive markets at the retail and wholesale
levels can result in loss of customers and displacement of high-priced
uncompetitive contracts or facilities and a range of other costs, assets,
payments and programs. These fall into the general categories of
"stranded assets," "stranded benefits" and
"stranded obligations." While FERC has asserted authority over
stranded assets at the wholesale level, states have jurisdiction over a
more substantial portion of the potential claims from claims at the retail
level. However, the issue of recovery of stranded costs by Nebraska
utilities is problematic. FERC has ruled in Order 888 that it will not
grant deference to NPPD and other nonjurisdictional utilities. Without a
state regulatory commission providing oversight for electric utilities to
which FERC would grant recognition, deference and authority on matters of
recovering stranded costs resulting from retail competition, it is
questionable whether public power entities in Nebraska can legally act to
enforce their own recovery and have that recovery recognized by FERC.
Resolution of this issue through litigation or legislation is important.
6.4.1 Stranded Assets
The possible range of total stranded assets for U.S. investor owned
utility companies has been placed at $50 billion to $300 billion, with the
most likely scenario estimated to be a total of $135 billion.7
The greatest dollar concentration is noted to be in the Northeast and
Western United States. These two regions could account for more than 40
percent of the total industry stranded costs. The U.S. Department of
Energy has placed its estimate of stranded assets at $88 billion. The
amount for the West North Central states (North Dakota, South Dakota,
Minnesota, Iowa, Missouri, Kansas and Nebraska), according to DOE, is $2.7
billion or 8 percent of the current rate base using present values as
stranded costs.8 These amounts are subjective, dependent upon
actions taken prior to retail competition to mitigate the stranded costs
and the length of the transition period to competition for which the costs
would be amortized.
Some states have proposed that private utility companies be allowed to
collect 100 percent of mitigated stranded costs. Other states are
considering a 50/50 or 60/40 percent split between consumers and
stockholders. Because Nebraska consumers are also the owners of the public
power and rural cooperative systems and have backed the financing for the
systems, they are both the stockholders and the customers and would absorb
the full costs. Those amounts will vary by system. Stranded cost payments
of 100 percent can dilute savings anticipated through competitive power
supply purchases.
6.4.2 Stranded Benefits
Because of competitive pressures, energy efficiency and conservation
programs, low income assistance programs, environmental protection and
other related efforts could be eliminated or face reduced funding. The
magnitude of stranded benefits depends upon the programs in place in the
state and their relative cost. Most states are considering measures to
protect these programs.
6.4.3 Stranded Obligations
Stranded obligations - payments made to local and state governments in
the forms or property and income taxes, franchise payments, gross receipts
taxes and other taxes and fees - have been estimated at $15 billion
annually nationwide.9 Rigorous analysis of this issue may push
the estimate much higher. Nebraska’s consumer-owned systems would
include the $51.2 million in revenue transfers noted in Chapter 5, in
addition to sales and use tax payments.
Potential Stranded Assets, Stranded Benefits and Stranded Obligations
for Nebraska have not yet been estimated. Analysis of the amounts, types
and methods of mitigation will be undertaken in Phase II of the L.R. 455
study, if appropriate.
6.5 BUNDLED OR MULTI-SERVICE DELIVERY
As discussion on competition in the electric industry has proceeded. A
growing interest has surfaced in the provision of "bundled" or
multi-service delivery to consumers. Such services commonly include both
"wires" and energy services: cable television,
telecommunications, natural gas, electricity as well as other services
such as home security. The interest of suppliers extends in some eases to
appliance and lawn care services. These services would be packaged and
offered by a single supplier that may be part of a merged conglomerate,
partnership or alliance. Many service providers consider this
"bundled" or multi-service approach to be the leading arena in
which electricity will be competitively bundled and sold.
In Nebraska, bundled or multi-service sales are in fact already taking
place. Energy America is offering both natural gas and electric supply on
a wholesale level. Panhandle Rural Electric Membership Association is
offering Internet communication services along with retail electric
supply. Basin Electric is providing both telephone and Internet services
with wholesale electric supply. KN Energy, based in Lakewood, Colorado, is
building on its retail natural gas market to offer a range of services in
Nebraska including Internet, telephone, "infotainment" and
appliance repair service. KN is co-marketing these services with DISH
Network, a satellite entertainment company; Metricom, an Internet service
provider; MaxServ, a home products repair service; Frontier, a
long-distance telephone service; and DQE, an energy efficiency company for
natural gas services.
As noted in Chapter 3, some types of consumer-owned systems are
restricted by statute in the types of consumer services they might offer.
During the 1997 legislative session, L.B. 506 was introduced to allow
provision of natural gas and telecommunications services, along with
electric supply by public power districts. However, the bill was
indefinitely postponed by the Transportation Committee. It is also
significant that a statutory prohibition on electric utilities operating
as common carriers was repealed by the legislature in 1997.
The multi-service sales by private companies and consumer-owned
systems, and proposals for broader participation in multi-service sales,
indicate that competition in natural gas, cable television and
telecommunications could increase the pressure for competition in retail
electric service within the state.
6.6 TRANSITION FROM A REGULATED ENVIRONMENT
Summary of Emerging Issues
As may be noted in this summary discussion, a transition from the
current industry market in Nebraska to a competitive market system would
require some degree of change in the industry’s structure, its
governance, its regulation, its operations and its tax and finance
programs. The extent of change will depend upon the option or options
chosen for Nebraska. The questions below summarize issues drawn from the
foregoing assessment of the industry to be addressed in examination of
options in Phase II of this study. They include both transitional and long
term concerns.
(1) History and Public Policy issues
- What policy options and competitive market models would be available
to the state?
- How would the basic principles of quality of service, reliability
and low cost be affected by any given market option or model for
generation, transmission and distribution?
- How would transitional issues under any given option affect the
long-term structure being established?
- How would economic and noneconomic benefits for consumers be
assured? How would reliability be assured? Would costs shift from
large to small consumers? Would competition have varying impacts for
urban and rural consumers?
- What role would consumers play in determinations about a competitive
market system? What role would cities and towns play in
determinations? What role would the legislature play? What role would
the electric systems play?
- Would the legislature take a segmented or comprehensive approach to
competition in retail electricity and other "wires" or
energy services?
(2) Structure and Governance issues
- What would be the impact of any given market option or model for
generation, transmission or distribution on the structure and
governance of the Nebraska systems?
- What would be the impacts of any given option on the contracts,
cooperative relationships and coordination of the individual systems?
- Would these competitive market system options assure lower rates and
price stability for the long term?
- Would these options allow for continued opportunities for citizens
to participate in policy making and rate setting at the local level?
(3) Statutory, regulatory and jurisdictional issues
- To what extent would alteration in structure require changes in the
statutory and regulatory framework? For generation? For transmission?
For distribution?
- To what extent will MAPP policies and practices alter the operations
and options of the Nebraska systems?
- To what extent will FERC policies and decisions alter the operations
and options of Nebraska systems?
- What would be the roles and jurisdictional authorities of the
legislature and gate regulatory and planning bodies, such as the Power
Review Board?
- What would be the extent of state or local jurisdiction over
out-of-state power suppliers and marketers?
- Who would have responsibility for fundamental requirements for
universal service, obligation to serve all consumers, and protection
of low-income consumers who may not be desirable to competitive power
marketers?
(4) Planning and Operations issues
What would the impact of any given option be on the electric facilities
within the state?
- Who will plan, construct and operate generating plants?
- What will the effects be on hydro production and irrigation?
- How will adequacy of capacity be assured in a competitive rather
than cooperative planning framework?
- Will there be a consumer-owned pool or sub-pool?
- Will there be both wholesale and retail competition?
- Who will plan, construct and operate transmission facilities?
- Who will monitor and document reliability and set and oversee
reliability standards?
- What impact will MAPP policies and requirements have on Nebraska
transmission?
- Who will operate and maintain distribution facilities?
- Who will be responsible for line extensions and at what cost to
consumers?
- What part of distribution functions will be competitive, if any?
- How will record-keeping and documentation be conducted?
- Who will be the provider of last resort?
What will be the extent of joint planning to assure efficient
operations and delivery of service?
- In the absence of forecasting, how will power supply be assured and
at what cost?
- How will efficiency measures and DSM be advanced?
- How will environmental protection be maintained and advanced?
- How will renewable energy development be advanced?
- How will technology development be advanced?
What will be the impacts on the work force and safety?
What will be the impacts on effectiveness of service delivery and cost
to consumers?
(5) Finance and Tax issues
- Without a guaranteed customer base and revenue stream, how would
public power systems utilize revenue bonds to finance future debt? Or
will all future financing come from taxable debt or internal funds?
How would this affect operational capability and rates?
- Given the variance in the financial positions of the diverse
systems, what would be the range of impacts, or significant individual
impacts of a competitive retail market?
- How will the IRS resolve the private-use restrictions on tax exempt
debt financed generation and transmission?
- How will consumer-owned systems comply with FERC open access
requirements for transmission service, especially in light of
private-use restrictions that may apply to transmission facilities?
- How will private-use restrictions impact consumer-owned system
participation in ISOs containing investor, consumer and privately
owned utilities and organizations?
- What would be the impacts of consumer-owned systems using taxable
debt for participation in competitive, non-traditional energy
services, telecommunications and other business growth areas within
and outside currently assigned service areas?
- What would be the most beneficial process for stranded-cost recovery
treatment for consumer-owned utility assets and debt in the transition
to a retail competition environment, if retail competition is to be
implemented?
- What would be the impact on revenue transfers of expanded FERC
jurisdiction into traditional state jurisdictional areas in regards to
rate setting and taxation?
- What would be the state and local tax implications as part of
stranded obligations and what mitigation processes might be used?
(6) Deregulation and Restructuring issues:
- Given the progress of retail competition legislation in other
states, should Nebraska consider retail competition, and how, and on
what schedule would such a process would be implemented in view of the
consumer-owned utility structure, operations and finance in existence?
- What are the primary transitional issues related to any given
competitive market option?
- What is the extent of FERC jurisdiction over Nebraska’s
consumer-owned utilities and the impact current and future FERC orders
will have on Nebraska’s transmission operations?
- What would be the measure and methods of mitigation and recovery for
stranded costs, stranded obligations and stranded benefits? What would
FERC’s role be in this recovery?
- What are the implications of consumer-owned system participation in
the MAPP ISO?
- What institutional mechanisms and regulatory measures would the
state need to establish resolve and protect against market power
problem?
- Given the recent trend in mergers between investor owned utilities
for purposes of cost reduction and efficiency, would consumer-owned
utilities benefit from increased mergers, alliances and other related
cooperative efforts?
- What are the competitive pressures arising at the federal, regional
and intrastate levels?
Chapter One - HISTORY
Chapter Two - STRUCTURE AND
GOVERNANCE
Chapter Three - STATUTORY AND
REGULATORY OVERSIGHT
Chapter Four - PLANNING AND
OPERATIONS
Chapter Five - FINANCE AND TAX
Chapter Six - DEREGULATION AND
RESTRUCTURING
Glossary
Chapter Notes
The Central Nebraska Public Power and
Irrigation District
415 Lincoln Street
P.O. Box 740
Holdrege, Nebraska 68949
Phone 308-995-8601 Fax 308-995-5705
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