Utilities in the South

Deregulation Postponed in Oklahoma Until at Least 2003

Gov. Frank Keating signed into law a bill that establishes a nine-member elected official task force to study the effects of electric deregulation in Oklahoma. The group's final report must be presented to the Governor, the Senate Pro Tempore and the Speaker of the House by December 31, 2002. Until that time, the implementation of electric restructuring is on hold. A critical issue for the task force to consider is the transmission component of electricity. Oklahoma has 18 new power plants for 3-million people. In comparison, California, which did not build a single new plant in the 1990s, has 34 million residents. Oklahoma currently has the eighth lowest electric power prices in the country.

Louisiana Officials Consider Deregulation Dynamics

Louisiana's Public Service Commission is considering the effects of deregulation. The PSC maintains limited deregulation, especially in areas of heavy industry, should be allowed under strict conditions. Other officials in Louisiana maintain that deregulating the utility industry statewide is not in the best interest of the state as a whole. However, PSC chairman Jimmy Field says limited deregulation may introduce competition to the wholesale market and could stimulate more reliable and cheaper service to heavy industry sites.

Texas Launches Pilot Program

Power customers in Texas who signed up for the state's deregulation pilot program, have begun to switch to new power generators and suppliers. Texas officials created the pilot program to give competing utilities several months to test their systems before statewide deregulation begins on Jan. 1, 2002. Texas officials are confident full-scale deregulation will go smoothly at the beginning of the year, when customers of investor-owned Texas utilities such as Reliant and TXU can switch to competing generators and suppliers. "We have done all of the testing and so have our market participants," said Sam Jones, chief operating officer for the Electric Reliability Council of Texas. "We just need to get it done and get down the road."

El Paso Situation Prompts FERC to Change Rules

The Federal Energy Regulatory Commission is preparing to issue new regulations on how interstate natural gas pipeline operators and power transmitters conduct business, and especially how they relate to their energy affiliates. The new rules of conduct will be based on the rules previously applied to gas pipeline operators and regulated electric utilities. For the first time, however, one set of rules will govern both gas and electricity. And the rules will be significantly expanded to fit the new ways business is conducted in a consolidated energy industry.

FERC's rewriting of the regulations has been prompted in part by a year-long dispute between Houston-based El Paso Corp. and the California Public Utilities Commission. FERC's top administrative judge, Curtis Wagner, ruled in September that two El Paso affiliates committed "blatant collusion" in violation of existing regulations when El Paso's marketing entity was secretly given a discount in "open" bidding for capacity on a gas pipeline owned by El Paso affiliate Mohave Pipeline. the pipeline delivers gas to California.

The judge did not find, however, that the "affiliate abuse" violations resulted in manipulation of gas prices in the California market, as California has charged. The judge's ruling is now before the full FERC, which is not likely to rule on the issue before December.

The two central principles of the new rules to be handed down by the FERC are that transmission providers -- both gas and electric -- must function independently from sales, marketing and other affiliates and that transmission providers must treat all customers -- affiliated and non-affiliated -- on a non-discriminatory basis.

LG&E to Stay in Louisville

Officials with E.ON AG, the German company buying LG&E Energy and its British parent company Powergen PLC, reiterated their commitment to keep LG&E headquartered in Louisville and subsidiary KU Energy headquartered in Lexington, both until at least 2010. In fact, E.ON's chief financial officer, Erhard Schiporeit, said that the company's intention is to make Louisville the center of U.S. operations. Customers of the utility have questioned whether E.ON will stick to the Powergen commitments. One such company questioning that was Alcan Aluminum, which has a 10-year, $500 million contract to buy power from LG&E Energy Marketing.

Environmental Group Sues Over Duke Power Permit

An environmental group has filed suit to overturn a permit granted to Duke Power to expand a major power plant south of Santa Cruz, Calif. Voices of the Wetlands claims that the permit was illegally awarded to Duke Power. The suit warns that the expansion of the plant will damage the Elkorn Slough. The environmental group accused the board that approved the permit of violating federal law by not requiring Duke Power to implement the best possible technology to minimize the effects on the environment around the Moss Landing power plant.

CalPine to Build $400 Million Generation Plant

CalPine Corp., the San Jose-based energy giant, announced it will build a $400 million electric generation plant in Fort Mill, S.C. The natural gas-fired, merchant power plant is expected to be built near the Catawba River in the northern half of York County. When completed, the plant is expected to produce a maximum of 500 megawatts of electricity. The CalPine plant would be the third peak-power generation plant planned or under consideration in the Charlotte area.

SCE&G Will Build Plant in Jasper, S.C.

A $450 million, combined cycle, natural gas-fueled power plant is being built in Jasper, S.C. by South Carolina Electric & Gas, a subsidiary of SCANA. The plant is expected to begin supplying electricity in the summer of 2004.

Some LNG Plants May Not Be Built

Last winter, natural gas prices soared to as high as $10 per million Btus, prompting many gas companies to announce new liquefied natural gas terminals in the U.S. Now, with the price of natural gas at $2 per million Btus or less, several industry analysts are predicting that some projects may be put on hold or cancelled altogether. "You will see some cancellations and delays," predicts Marshall Adkins, an analyst in the Houston office of Raymond James & Associates.

AEP Affiliate to Sell Power Competitively in Texas

AEP Retail Energy, the retail electric affiliate of American Electric Power, is seeking certification from the state of Texas to offer its service throughout the areas of Texas that will be open to competition when deregulation begins on Jan. 1, 2002. AEP already owns and operates three Texas utilities: Central Power & Light, West Texas Utilities and Southwestern Electric Power. Communities served by municipal owned utilities and electric cooperatives in Texas are not subject to competition unless their boards choose to compete.

Dominion Resources Latest to Build in Carolinas

Richmond, Va.-based Dominion Resources is planning the construction of a $600 million natural gas-fired power plant in Person County, N.C. Dominion's announcement is on the heels of 10 other utility companies that have recently announced plans to build power plants in North and South Carolina.

Duke Building Mississippi Plants

A Duke Energy subsidiary and a joint venture between Duke and Fluor Corp. will build two power plants in Mississippi with a combined peak capacity of 1,280 megawatts. The costs of the construction have not been disclosed, but Houston-based Duke Energy North America and Charlotte-based Duke/Fluor Daniel expect to complete construction of the plants by the summer of 2002. Each plant will produce 640 megawatts of peak capacity. One will be built in Enterprise, Miss. and the other in Southaven, Miss.

Duke Endowment Donates $10M to Rural Areas

The Duke Endowment will donate more than $10 million to strengthen rural communities in the Carolinas. The program, managed in conjunction with MDC Inc., a Chapel-Hill, N.C.-based economic research and development organization, will include direct grants, professional coaching and technical assistance.

Atmos Energy to Buy Mississippi Valley Gas

Natural gas distributor Atmos Energy Corp. has agreed to acquire Mississippi Valley Gas, a privately held natural gas utility, for $150 million. Mississippi Valley Gas is the state's largest gas utility. Atmos Energy distributes natural gas to about 1.4 million customers in 11 states through its operating divisions Atmos Energy Louisiana, Energas Co., Greeley Gas Co., United Cities Gas and Western Kentucky Gas.

Gas Suppliers to Build S.C. Pipeline

An alliance of three natural gas supply companies in South Carolina will build a $37 million pipeline through three counties to reduce their dependence on an existing pipeline. Natural gas authorities in York, Chester and Lancaster counties have formed Patriots Energy Group to operate the 60-mile pipeline from Blacksburg to the western edge of Lancaster County. Plans call for a 16-inch gas line to be running by mid-2003.

Mirant to build plant in Gastonia, N.C.

Atlanta-based Mirant Corp. plans to build a 1,200-megawatt natural gas-fired power plant in Gastonia. The facility, which requires regulatory approval, will be Mirant's first in North Carolina. Mirant is expected to invest $500 million in the plant, create 35 permanent jobs and as many as 300 temporary construction jobs.

PG&E Pulls Plug on Rockville, Md. HQ

PG&E National Energy Group has shelved plans for a new headquarters in Rockville, Md. The Bethesda, Md.-based unit of San Francisco's PG&E had planned to build a 480,000-square-foot, 1,000-employee headquarters at the Tower Oaks development in Rockville. However, with the parent company struggling, the subsidiary postponed the move. PG&E filed for bankruptcy in April.

N.C. House Strips Electricity Tax Breaks

The North Carolina House of Representatives has stripped most of the electricity sales tax breaks from legislation to expand the state's William S. Lee Act, the primary source of business incentives in the state. The tax breaks would have cost the state almost $7 million in 2002. Rep. David Redwine, D-Brunswick, said he didn't believe the state could afford to provide the tax breaks for large users of electricity. House leaders did leave $730,000 in electricity sales tax breaks for the Alcoa aluminum plant in Badlin. That plant is the largest user of electricity in the state.

Three Southern States Set for Deregulation in 2002

Texas and Virginia are set to open up electric competition in January and Maryland is expected to complete deregulation of shareholder utilities in July 2002, but won't deregulate cooperatives until 2003. Arkansas, on the other hand, has passed legislation delaying implementation for up to five years.

Gas Deregulation in Georgia Isn't Working

It's been three years since Georgia deregulated its natural gas industry. Since then, Georgia gas customers have experienced thousands of billing errors by gas marketers, residential gas prices that remain some of the highest in the South, marketers going bankrupt and customer complaints rising from virtually none at the beginning of 1998 to over 8,000 since. There's no question that gas deregulation in Georgia has gone wrong. In fact, never has there been such a gap between wholesale and retail prices of natural gas in Georgia. While some large users in the industrial sector are benefitting, hundreds of thousands of residential users in Georgia are not. There's been some talk among government officials about "re-regulation" of natural gas in Georgia, but how to do it and who would be the regulated utility is anyone's guess. Gov. Roy Barnes has said publicly he will not support ending deregulation, however, he strongly maintains something must be done to fix what has become one of the most embarrassing ventures into utility deregulation in the South.