Indiana regulatory staff calls for electric service quality rules

By the OGJ Online Staff

HOUSTON, Aug. 17, 2001 – Over industry objections, the staff of the Indiana Utility Regulatory Commission recommended the commission set rules for electric service quality in a new assessment of the state electric power industry.

Electric utility holding companies are cutting staff and their holding companies are devoting more attention and resources to unregulated activities, the report said. More mergers will accentuate these changes, while further “diverting attention from basic utility functions,” the staff said.

Utilities said the action was unnecessary because they already have an obligation to provide reasonably adequate service and the commission already has authority to investigate allegations of insufficient, inadequate, or unsafe service and order corrections.

They argued penalties should only be considered in instances of willful failure to discharge responsibility and the ultimate sanction would be the loss of the exclusive right to serve.

The report recommended the commission continue to focus on the activities of multistate utilities with particular emphasis on possible cost shifting between affiliate companies, dispatch methods of the companies’ generation fleets, and accounting issues arising from reserve sharing, and energy transfers between operating companies.

“The commission needs to ensure that reliability will not be harmed, but rather enhanced, by a multistate utility’s membership in a regional transmission organization, or by implementing a new operating agreement for its operating companies,” the report said.

With respect to generation, the staff said the commission will need to keep a close watch on how well market forces are providing generation resources for Indiana utilities, and, indirectly, ratepayers. A shortfall could jeopardize reliability and result in a higher prices, the report said.

“If the situation were to significantly deteriorate, the commission would have to examine the possibility of ordering Indiana utilities to build their own generating plants,” it said. Furthermore, both utilities and state regulators need to become more familiar with risk management concepts and portfolio theory, the staff said, resulting from increased reliance on wholesale purchases from a variety of suppliers and with different degrees of “firmness”

The commission “should closely monitor how utilities incorporate these concepts into their long-term resource plans and how the methods are used in conjunction with wholesale purchases,” the staff said.

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