<PAGE> File No. 70-8779
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM U-1
__________________________________
APPLICATION OR DECLARATION
under the
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
* * *
AMERICAN ELECTRIC POWER COMPANY, INC.
1 Riverside Plaza, Columbus, Ohio 43215
AMERICAN ELECTRIC POWER SERVICE CORPORATION
1 Riverside Plaza, Columbus, Ohio 43215
APPALACHIAN POWER COMPANY
40 Franklin Road, Roanoke, Virginia 24022
COLUMBUS SOUTHERN POWER COMPANY
215 North Front Street, Columbus, Ohio 43215
INDIANA MICHIGAN POWER COMPANY
One Summit Square, Fort Wayne, Indiana 46801
KENTUCKY POWER COMPANY
1701 Central Avenue, Ashland, Kentucky 41101
KINGSPORT POWER COMPANY
422 Broad Street, Kingsport, Tennessee 37660
OHIO POWER COMPANY
339 Cleveland Avenue, S.W., Canton, Ohio 44702
WHEELING POWER COMPANY
51 - 16th Street, Wheeling, West Virginia 26003
(Name of company or companies filing this statement
and addresses of principal executive offices)
* * *
AMERICAN ELECTRIC POWER COMPANY, INC.
1 Riverside Plaza, Columbus, Ohio 43215
(Name of top registered holding company
parent of each applicant or declarant)
* * *
G. P. Maloney, Executive Vice President
AMERICAN ELECTRIC POWER SERVICE CORPORATION
1 Riverside Plaza, Columbus, Ohio 43215
John F. Di Lorenzo, Jr., Associate General Counsel
AMERICAN ELECTRIC POWER SERVICE CORPORATION
1 Riverside Plaza, Columbus, Ohio 43215
(Names and addresses of agents for service)
American Electric Power Company, Inc. ("American"), a
holding company registered under the Public Utility Holding
Company Act of 1935 ("1935 Act"), and American Electric Power
Service Corporation, Appalachian Power Company, Columbus Southern
Power Company, Kentucky Power Company, Kingsport Power Company,
Indiana Michigan Power Company, Ohio Power Company and Wheeling
Power Company (sometimes collectively referred to herein as
"Applicants") hereby amend their Application or Declaration on
Form U-1 in File No. 70-8779 as follows:
1. ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION is amended
by adding the following at the end thereof:
"F. Release of Jurisdiction Over Retail Sales
(1) Introduction.
Pursuant to an order (the 'Order') issued by the
Commission in this proceeding on September 13, 1996 (Release No.
35-26572), the Applicants were authorized to acquire New
Subsidiaries to engage in the businesses of brokering and
marketing Energy Commodities, including natural and manufactured
gas, electric power, emission allowances, coal, oil, refined
petroleum, refined petroleum products and natural gas liquids.
The New Subsidiaries' brokering business consists of arranging
the sale and purchase, transportation, transmission and storage
of Energy Commodities for a commission, while their marketing
business consists of entering into contracts to sell, purchase,
exchange, pool, transport, transmit, distribute, store and
otherwise deal in Energy Commodities. The New Subsidiaries may
from time to time have an inventory of Energy Commodities but<PAGE>
will not own or operate facilities used for the production,
generation, processing, storage, transmission, transportation or
distribution thereof. No New Subsidiary will be a 'public
utility company' under Section 2(a)(5) of the 1935 Act.
The New Subsidiaries' businesses include brokering and
marketing electric power and natural gas to wholesale customers.
The New Subsidiaries also intend to broker and market electric
power and natural gas to retail customers. In the Order, the
Commission reserved jurisdiction over the brokering and marketing
of electric power and natural gas at retail pending completion of
the file with respect to the permissibility of such sales in
various states. Applicants now request the Commission to release
jurisdiction over the brokering and marketing of electric power
and natural gas at retail to the extent permitted or authorized
by state laws and state commission orders.
As discussed herein, given that retail gas competition
is already permitted for many customers and that the pattern of
retail electric programs is already being established, it serves
no public purpose for the Commission to prevent the New
Subsidiaries from readily participating in these programs.
Immediate entry into any such programs is essential in order to
compete with other potential participants. To require Commission
approval of retail gas and power marketing in each state would
seem wasteful of time and expense for both the Commission and the
New Subsidiaries, would place the New Subsidiaries at a
significant competitive disadvantage very difficult to overcome,
and would deprive the programs and consumers of the benefits of
rapid broad supplier participation.
(i) Commission Time and Expense.
Retail sales of natural gas by other than the
local distribution company ('LDC') are currently permitted<PAGE>
in every state. As such, the New Subsidiaries can begin
selling natural gas to industrial and commercial customers
immediately and to residential customers as programs are
implemented. Further, it is anticipated that many states
will eventually implement retail electric programs. Unless
the Commission releases jurisdiction over the brokering and
marketing of electric power and natural gas under these
programs, the New Subsidiaries, as well as similar
subsidiaries of the other registered utilities, will be
required to file a new amendment requesting authority to
participate in such programs as they are implemented in each
state. Thus, the New Subsidiaries alone could file more
than forty amendments, each of which would require the New
Subsidiaries and the Commission to spend time and incur
expenses preparing, reviewing and approving such amendments.
(ii) Benefits to Competitive Markets.
As is the case in the Massachusetts and New
Hampshire programs, future electric and gas programs are
likely to be offered to a limited number of customers.
Unless the New Subsidiaries can begin marketing to these
customers as soon as the programs permit, suppliers not
subject to the 1935 Act will already have aggressively
marketed their services to the eligible customers and
possibly entered into service agreements with them. The
delay between filing an amendment after a retail program is
announced and obtaining Commission approval of that
amendment will inhibit the New Subsidiaries' entry into new
markets and limit the New Subsidiaries' ability to compete
for the limited pool of available customers. From a
marketing perspective, early access to potential customers
is of critical importance in a competitive retail<PAGE>
environment. In addition, the very success of the pilot
programs depends upon the entry of as many participants as
possible into the retail power market.
(iii) Benefits to Applicants' Customers.
Given that the states served by the American
Electric Power System already permit retail sales of natural
gas by other than the LDC and that many of these states will
eventually implement retail electric programs, Applicants'
customers would see an immediate benefit from the New
Subsidiaries' entry into the retail natural gas and electric
markets. Applicants' customers will have an additional
competitive option when deciding from whom to purchase their
power or natural gas. Presumably, the presence of
additional competitors in these markets will put downward
pressure on the price charged for natural gas and power,
thus lowering the customers' total energy costs. In
addition, the New Subsidiaries can offer Applicants'
customers both natural gas and power, permitting the
customers to consolidate their energy needs with one company
and to reduce transaction costs.
(2) Retail Sales of Natural Gas
Historically, natural gas was bundled with
transportation and sold by the LDC to retail customers at
regulated rates. Over the last two decades, however, the Federal
Energy Regulatory Commission ('FERC') and the state commissions
have adopted policies or procedures favoring competition in the
sale of natural gas.(1) These policies have encouraged
additional sellers of natural gas to enter the market. In
today's competitive energy environment, most industrial and many
commercial customers purchase their natural gas from the supplier
of their choice. In addition, states such as New York have<PAGE>
opened and unbundled their markets to the residential level.
Interstate pipelines and LDCs merely transport the natural gas to
these customers.
In order to permit this competitive market in natural
gas, the sale of natural gas by interstate pipelines was
separated from the transportation of natural gas at the federal
level.(2) Consistent with the public policy favoring competition
in the natural gas market, state commissions have been
aggressively deregulating sales to end users in order to
encourage new marketers of natural gas at the retail level. As a
result, a robust, competitive marketplace has evolved where
retail customers can purchase gas directly from gas producers,
non-regulated utility affiliates, and independent marketers.
These purchases can be consummated in the production region,
anywhere along the pipeline transmission system, or at the city
gate of the LDC.
The retail natural gas market has undergone profound
changes in the last twenty years. Whereas rates were once fixed
from the production field to the burner tip, today there is
competition at the wellhead and for the retail customer. FERC
and the state regulatory commissions have consistently held that
competition in the retail natural gas market is in the public
interest and have encouraged pipelines and LDCs to unbundle their
transportation and distribution services. As a result, the vast
majority of natural gas purchased by industrial customers is
transported, but not sold, by the LDC, and an increasing number
of commercial customers are purchasing their own gas for delivery
by the LDC.
All forty-nine continental states, Canada and Mexico
have adopted public policies favoring competition in the retail
natural gas market to some degree. Retail sales of natural gas<PAGE>
by other than the LDC, unlike retail power sales, are currently
permitted in every state. Thus, the New Subsidiaries can begin
selling natural gas to industrial and commercial customers
immediately. And, as evidenced by the New York Public Service
Commission's order deregulating sales of gas to residential
customers, the New Subsidiaries eventually will be permitted to
sell gas to residential customers in all states, and could in the
state of New York today. Authorizing the New Subsidiaries to
sell natural gas at retail will increase competition in the
natural gas market, and therefore benefit all natural gas
customers.
Based upon the foregoing discussion and the advanced
state of competition in the retail natural gas market, the New
Subsidiaries hereby request authority to broker and market
natural gas at retail to the extent permitted or authorized by
state laws and state commission orders.
(3) Retail Sales of Electric Power
Competitive pressures are rapidly increasing in the
electric utility business. These pressures arise from a number
of trends, including surplus generating capacity, regional rate
disparities, increased generating efficiencies, and regulatory
programs to foster competition. Increased competition has been
most evident to date in the bulk power market, in which
nonutility generators have significantly increased their market
share. In states across the country, there has been an
increasing number of proposals which would permit a retail
customer to choose its electricity supplier and would require the
utility currently supplying such customer to deliver over its
transmission and distribution systems the electricity purchased
from the chosen supplier. Legislative and public utility
commission initiatives are moving rapidly, and the New<PAGE>
Subsidiaries may be in a position to pursue opportunities in
various states' retail markets.
States such as Illinois, Massachusetts and New
Hampshire have implemented pilot programs under which utilities
provide customers with access to alternative suppliers of
electric power.(3) In addition, many other states have
instituted proceedings to examine competition at the retail
level.(4) It is expected that the electric utility industry will
continue to evolve and that more states will permit retail
electricity transactions by power marketers. Authorizing the New
Subsidiaries to sell electricity at retail will increase
competition in the electric power market, and therefore benefit
all electric power customers.
Based upon the foregoing and the emerging competitive
electric power market, the New Subsidiaries hereby request that
the Commission release jurisdiction over retail sales of
electricity to the extent retail sales are permitted or
authorized by state law and state commission orders.
NOTES
(1) For a discussion of retail gas sales generally and for
a survey of the seven states in which AEP electric utilities sell
electric power plus California and New York, see Exhibit 1-A,
'Memorandum Regarding Competition in Retail Sales of Natural
Gas.'
(2) For a discussion of the deregulation of interstate
sales of natural gas by FERC, please see the 'Supplemental
Memorandum Regarding Regulation of Interstate Sales of Natural
Gas', attached as a supplement to Exhibit 1-A.
(3) For a discussion of the Massachusetts and New Hampshire
pilot programs, please see Release No. 35-26519 (May 23, 1996)
(Eastern Utilities Associates) and Release Number 35-26527 (May
31, 1996) (Unitil Corporation). Pursuant to these Releases, the
Commission authorized public utility affiliates to participate in
the Massachusetts and New Hampshire pilot programs. The
Commission found that the 'programs in both states permit a
finding that the proposed activities are necessary or appropriate
in the public interest or for the protection of investors or
consumers and not detrimental to the proper functioning of the
integrated system.'<PAGE>
(4) For a discussion of such initiatives in Illinois,
Michigan, Ohio, New York and Pennsylvania, please see Exhibit 1-
B, 'Memorandum Regarding Competition in Retail Power Sales'. In
addition, many other states, including but not limited to
Arizona, California, Maine, Rhode Island, Texas, Virginia,
Washington and Wisconsin, have begun proceedings to study
competition in the retail power market.
2. By filing the following exhibits:
Exhibit 1-A Memorandum Regarding Competition in Retail
Sales of Natural Gas
Exhibit 1-B Memorandum Regarding Competition in Retail
Power Sales"
SIGNATURE
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, the undersigned companies have duly caused
this statement to be signed on their behalf by the undersigned
thereunto duly authorized.
AMERICAN ELECTRIC POWER SERVICE CORPORATION
By /s/ G. P. Maloney
Executive Vice President
AMERICAN ELECTRIC POWER COMPANY, INC.
APPALACHIAN POWER COMPANY
COLUMBUS SOUTHERN POWER COMPANY
KENTUCKY POWER COMPANY
KINGSPORT POWER COMPANY
INDIANA MICHIGAN POWER COMPANY
OHIO POWER COMPANY
WHEELING POWER COMPANY
By /s/ G. P. Maloney
Vice President
Dated: September 18, 1996
Exhibit 1-A
MEMORANDUM REGARDING COMPETITION
IN RETAIL SALES OF NATURAL GAS
June 18, 1996
I. Introduction.
This Memorandum ("Memorandum") is in connection with File
No. 70-8779 ("Application"), in which American Electric Power
Company, Inc. ("AEP"), through direct and indirect subsidiaries,
proposes to engage in the businesses of brokering and marketing
Energy Commodities, including natural gas, to retail and
wholesale customers. In the Application, AEP requested that
jurisdiction be reserved over the brokering and marketing of
natural gas at retail pending completion of the file with respect
to the permissibility of such sales. This Memorandum shows that
sales of natural gas at retail by brokers and marketers are
generally permitted to industrial and commercial customers and
are beginning to be permitted to residential customers. This
Memorandum reviews retail gas sales generally and then surveys
the seven states in which AEP electric utilities sell electric
power plus California and New York.
II. Retail Sales of Natural Gas.
The retail sale of natural gas has changed dramatically
since the 1970s. Historically, natural gas was bundled with
transportation and sold by the local distribution company ("LDC")
to retail customers at regulated rates. Over the last two
decades, however, the Federal Energy Regulatory Commission and
the state commissions have adopted policies or procedures
favoring competition in the sale of natural gas. These policies
have encouraged additional sellers of natural gas to enter the
market. In today's competitive energy environment, most
industrial and many commercial customers purchase their natural
gas from the supplier of their choice. In addition, states such
as New York have opened and unbundled their markets to the
residential level. Interstate pipelines and LDC's merely
transport the natural gas to these customers.
In order to permit this competitive market in natural gas,
the sale of natural gas by interstate pipelines was separated
from the transportation of natural gas at the federal level(1).
At the state level, LDC's have been encouraged to provide
transportation separately from sales of natural gas. As a
result, a robust, competitive marketplace has evolved where
retail customers can purchase gas directly from gas producers,
non-regulated utility affiliates, and independent marketers.
These purchases can be consummated in the production region,
anywhere along the pipeline transmission system, or at the city
gate of the LDC.
Deregulation of sales of natural gas and unbundling of
transportation services has led to increasing competition for
sales to industrial and commercial customers, and is incipient in
the residential sector. In 1986, natural gas delivered, but not
sold, by LDC's to industrial customers nationwide accounted for
40% of total deliveries to industrial customers.(2) Nationwide,
by 1995, an average of 78% of all gas delivered to industrial
customers was not sold by the LDC, and in some states this
percentage was 98%.(3) That is, on a nationwide basis LDC sales
to industrial customers represented only 22% of total gas
delivered by the LDC to industrial customers during 1995.
Likewise, in 1987, 7% of total deliveries to commercial customers
nationwide were deliveries for the account of others.(4) By
1995, however, 26% of total deliveries to commercial customers
nationwide were delivered, but not sold, by LDC's.(5) That is,
nationwide sales to commercial customers decreased from 93% of
total gas transported to these customers in 1987 to 74% in 1995.
These nationwide averages are illustrated as shown in Figure 1,
while the relative national distribution of non-utility gas
purchases are shown for industrial and commercial customers in
Figure 2.
Figure 1
TRANSPORTATION GAS
SHARE OF TOTAL DELIVERIES TO SECTOR
1986 - 1995
Year Commercial Industrial
% %
1986 NA 40
1987 7 53
1988 9 57
1989 11 63
1990 13 65
1991 15 67
1992 17 70
1993 16 71
1994 21 75
1995 26 78
Figure 2
PERCENTAGE OF TOTAL DELIVERIES REPRESENTED BY ONSYSTEM SALES BY STATE
<TABLE>
<CAPTION>
1995
State
Commercial Industrial
<S> <C> <C>
Alabama . . . . . . . . . . . 75.0 16.7
Alaska . . . . . . . . . . . 80.2 93.3
Arizona . . . . . . . . . . . 88.3 26.9
Arkansas . . . . . . . . . . 96.0 13.6
California . . . . . . . . . 51.8 13.0
Colorado . . . . . . . . . . NA NA
Connecticut . . . . . . . . . 82.7 82.9
Delaware . . . . . . . . . . 100.0 68.1
District of Columbia . . . . 76.7 -
Florida . . . . . . . . . . . 97.5 11.0
Georgia . . . . . . . . . . . 92.2 31.4
Hawaii . . . . . . . . . . . 100.0 -
Idaho . . . . . . . . . . . . NA NA
Illinois . . . . . . . . . . 49.4 9.6
Indiana . . . . . . . . . . . 86.0 14.7
Iowa . . . . . . . . . . . . 83.2 8.4
Kansas . . . . . . . . . . . 62.1 13.1
Kentucky . . . . . . . . . . 87.6 23.1
Louisiana . . . . . . . . . . 98.0 NA
Maine . . . . . . . . . . . . 100.0 100.0
Maryland . . . . . . . . . . NA NA
Massachusetts . . . . . . . . 85.0 30.9
Michigan . . . . . . . . . . 63.6 6.7
Minnesota . . . . . . . . . . 84.0 33.1
Mississippi . . . . . . . . . NA NA
Missouri . . . . . . . . . . 81.0 20.2
Montana . . . . . . . . . . . 91.6 3.1
Nebraska . . . . . . . . . . NA 18.6
Nevada . . . . . . . . . . . 77.2 1.9
New Hampshire . . . . . . . . 99.2 64.8
New Jersey . . . . . . . . . 85.9 52.8
New Mexico . . . . . . . . . 54.5 2.3
New York . . . . . . . . . . NA 12.9
North Carolina . . . . . . . 90.9 39.8
North Dakota . . . . . . . . NA NA
Ohio . . . . . . . . . . . . 75.5 5.2
Oklahoma . . . . . . . . . . 87.1 15.8
Oregon . . . . . . . . . . . NA NA
Pennsylvania . . . . . . . . NA 15.0
Rhode Island . . . . . . . . 100.0 11.7
South Carolina . . . . . . . 95.4 80.3
South Dakota . . . . . . . . 86.6 27.2
Tennessee . . . . . . . . . . 86.5 34.7
Texas . . . . . . . . . . . . 67.7 24.1
Utah . . . . . . . . . . . . 81.7 11.4
Vermont . . . . . . . . . . . NA NA
Virginia . . . . . . . . . . 81.1 11.9
Washington . . . . . . . . . NA NA
West Virginia . . . . . . . . 50.8 12.6
Wisconsin . . . . . . . . . . 93.5 48.4
Wyoming . . . . . . . . . . . NA NA
TOTAL 74.0 22.2
</TABLE>
NA: Not Applicable
- : Not Applicable
In a recent study, 99% of LDC's surveyed (in 111 of the 116
service areas in the United States and Canada) offered unbundled
transportation service to some class or classes of customers.(6)
Ten years ago, only 45% of LDC's offered transportation service
that was unbundled from the natural gas supply.(7) Further, the
minimum size of the customer eligible for unbundled
transportation service has decreased, expanding the market for
natural gas sales.(8) States are continuing to expand the
competitive market for natural gas as they unbundle the sale of
natural gas to small commercial and residential customers.
The intensity of the competition among gas marketers has
reached new highs. Since November, 1995 the following major oil
and gas companies and gas marketers have formed partnerships to
expand their gas marketing capabilities: Shell Oil and Tejas
Gas, Conoco and Alliance Gas Services, Chevron and NGC
Corporation, and Mobil and PanEnergy Corp. In addition,
Utilicorp United, Inc. recently announced plans to purchase
Unifield Natural Gas Group, Inc., a major gas marketer to
commercial and industrial customers in the Chicago metropolitan
area. LDC's have also begun to encourage competition in small
commercial and residential sales, as witnessed by the customer
choice programs voluntarily proposed by Central Illinois Light
Company and Wisconsin Gas Company. Of course, large, established
gas marketers such as Enron Corp. and NGC Corporation continue to
aggressively promote competition and pursue customers for their
gas marketing services.
Even prior to the Gas Related Activities Act of 1990, the
staff of the Securities and Exchange Commission ("SEC")
recognized the increasingly competitive nature of the wholesale
and retail natural gas markets. In Release No. 35-24329 (Feb.
27, 1987), the staff by delegated authority authorized CNG
Trading Company, a wholly-owned subsidiary of Consolidated
Natural Gas Company, to purchase and sell gas supplies obtained
from competitively priced sources and thereby compete with
independent gas marketing companies for delivery of low-cost,
non-regulated gas supplies to LDC's and their industrial and
commercial end users.
III. Unbundling of Local Distribution Company Services.
Consistent with the public policy favoring competition in
the natural gas market, state commissions have been aggressively
deregulating sales to end users in order to encourage new
marketers of natural gas at the retail level. As a result,
purchasers of natural gas now have access to multiple sellers and
can make purchases under competitive conditions. The following
provides a summary of the actions taken by the seven states that
the AEP System serves plus California and New York to promote
competition in the retail natural gas market.
A. Ohio.
Ohio was one of the leaders in developing gas transportation
"self-help" programs for industrial customers in the 1970s.
These programs allowed certain Ohio industrial customers to
purchase non-LDC gas during the frequent shortages of the period.
Following FERC's issuance of the proposed rulemaking in the Order
436 proceeding in 1985, The Public Utilities Commission of Ohio
("PUCO") instituted a generic proceeding to investigate the
availability of transportation services provided by Ohio LDC's to
retail end-use customers.(9) As a result of the 85-800
Proceeding, PUCO adopted Gas Transportation Program Guidelines
("Guidelines") governing the unbundling of LDC transportation and
distribution services for end-use customers. The purpose of the
Guidelines is to facilitate gas transportation within Ohio by
providing broad guidance to LDC's while allowing individual
transportation tariffs and special contract language to detail
specific terms and conditions of service.
The Guidelines provide that each gas or natural gas utility
subject to the jurisdiction of PUCO that elects to provide
transportation of gas developed, owned, obtained or purchased by
an end-user must provide such service on a nondiscriminatory
basis, subject to the capacity of its system. All transportation
tariffs filed by regulated utilities are required to provide for
unbundled services such as firm and interruptible and such other
selections as PUCO may from time to time approve. For example,
The Cincinnati Gas & Electric Company offers transportation
services on an interruptible basis to any customer that utilizes
a minimum of 10,000 Ccf per month, and firm transportation
service to any customer willing to pay a monthly administrative
charge and the rate set forth in the tariff.(10) Likewise,
Columbia Gas of Ohio, Inc. offers a general transportation
service (i) on a firm basis to any commercial or industrial end-
use customer that consumes less than 300 Mcf per year; (ii) on a
firm basis to any non-residential customer that consumes at least
300 Mcf per year; and (iii) on a firm basis to any non-
residential customer that consumes at least 18,000 Mcf per
year.(11)
The success of the Guidelines in allowing competitive sales
of natural gas in Ohio is evidenced by the fact that in 1995
natural gas delivered for the account of others to industrial
customers accounted for 95% of total deliveries to industrial
customers in Ohio.(12) Also during 1995, natural gas delivered
for the account of others to commercial customers accounted for
25% of total deliveries to commercial customers in Ohio.(13)
A bill recently was passed by the Ohio Senate and the Ohio
House of Representatives that would allow the state's regulated
natural gas utilities to compete on even terms with gas marketers
by authorizing the utilities to sell gas to customers at market-
based prices.(14) As stated by the sponsor of the Bill, "most
commercial and industrial customers have the option of buying
their natural gas directly from producers, brokers, or marketers,
rather than from their local gas utility. These producers,
brokers, and marketers are not regulated as public
utilities...[and] the utility serves only as a transporter,
delivering the gas to the customers' factories or offices....By
allowing utilities to compete for commodity sales along with
other existing suppliers, the bill should lead to an increase in
competition, with better service and
lower prices for the state's consumers."(15) The Ohio
Legislature has now joined PUCO in stating that promoting
competition in the sale of natural gas is sound public policy.
The bill presently is awaiting action by the governor.
B. Indiana.
Although the Indiana Utility Regulatory Commission ("IURC")
has not, to date, instituted a broad proceeding regarding
deregulation of the natural gas industry, the gas utilities
regulated by the IURC have filed, and the IURC has accepted,
tariffs that provide for nondiscriminatory transportation of gas
developed, owned, obtained or purchased by an end-user, subject
to the capacities of their respective systems.
Indiana Gas Company, Inc. offers transportation service (i)
on an interruptible basis to any commercial or industrial
customer that has an annual usage of greater than 50,000 therms
and less than 500,000 therms and a maximum daily usage of less
than 30,000 therms, and (ii) interruptible or firm transportation
service to any commercial or industrial customer that has an
annual usage of 500,000 therms or greater or that has a maximum
daily usage of 30,000 therms or greater.(16) Citizens Gas & Coke
Utility offers transportation service (i) on an interruptible
basis to any commercial or industrial customer who uses a minimum
of 300,000 therms per year through one or more meters, of which
at least 150,000 therms must be supplied by offsystem gas, and
(ii) on an interruptible basis to any commercial or industrial
customer using at least 150,000 therms per year at one
location.(17) And Northern Indiana Public Service Company offers
transportation service (i) on a firm basis to any customer whose
gas requirements average at least 200 Dth per day and (ii) on a
firm basis to any customer whose gas requirements average at
least 100 Dth per day.(18)
The tariffs filed by the above utilities have permitted
competition in retail sales of natural gas in Indiana. In 1995,
natural gas delivered by LDC's under these and similar tariffs to
industrial customers accounted for 85% of total deliveries to
industrial customers in Indiana.(19) Also during 1995, natural
gas delivered for the account of others to commercial customers
accounted for 14% of total deliveries to commercial customers in
Indiana.(20)
C. Kentucky.
Following FERC's issuance of Order 436, the Kentucky Public
Service Commission ("KPSC") instituted a proceeding to
investigate the impact of federal energy policies on natural gas
to Kentucky consumers and supplies, including the impact on the
availability of transportation services provided by Kentucky
LDC's to end-use customers.(21) As a result of the Proceeding,
the KPSC adopted an Order ("Order") mandating the unbundling of
the sale, transportation and related services available to end-
use customers. Among the objectives of the Order are to ensure
that all customers of LDC's have an opportunity to benefit from
increased competition in the natural gas industry, to promote the
use of the retail distribution system by customers who arrange
for their own natural gas supply, and to evaluate the unbundling
of services at the LDC level.(22) Through the Order, the KPSC
expressed its belief that competition in the retail natural gas
market is in the public interest.
The Order provides that each LDC must provide transportation
services on a nondiscriminatory basis to any customer on a first
come, first served basis, subject to the capacity of the LDC's
system. That is, transportation must be made available to any
end-user who can arrange for its own supply of natural gas,
unless transportation capacity is unavailable. All
transportation tariffs filed by LDC's are reviewed on a case-by-
case basis and are required to provide for unbundled sales and
transportation service, such as firm and interruptible, and such
other selections as KPSC may from time to time approve.
The success of the Order in promoting competition in
Kentucky is evidenced by the fact that in 1995 natural gas
delivered for the account of others to industrial customers
accounted for 77% of total deliveries to industrial customers in
Kentucky.(23) Also during 1995, natural gas delivered for the
account of others to commercial customers accounted for 12% of
total deliveries to commercial customers in Kentucky.(24)
D. Michigan.
The Michigan Public Service Commission ("MPSC") has not
issued general guidelines governing gas transportation services.
Instead, the MPSC has used the contested rate case process to
decide transportation issues on a case-by-case basis.(25) Much
like the Indiana utilities, the gas utilities regulated by the
MPSC have filed, and the MPSC has accepted, tariffs that provide
for nondiscriminatory transportation of gas owned or purchased by
an end-user, subject to the capacities of their respective
systems.(26)
Michigan Consolidated Gas Company offers transportation
service on both an interruptible and firm basis under various
tariffs to any customer, regardless of gas usage, desiring the
service and willing to pay.(27) Likewise, Consumers Power
Company offers transportation service on both an interruptible
and firm basis under various tariffs to any customer, regardless
of gas usage, desiring the service and willing to pay.(28)
The tariffs filed by the above utilities have allowed
aggressive competition in Michigan. In 1995, natural gas
delivered (but not sold) by LDC's to industrial customers
accounted for 93% of total deliveries to industrial customers in
Michigan.(29) Also during 1995, natural gas delivered for the
account of others to commercial customers accounted for 36% of
total deliveries to commercial customers in Michigan.(30)
Finally, the MPSC recently initiated a formal legislative
hearing to determine whether it is appropriate to allow all
customers to have access to the competitive natural gas market by
expanding the availability of gas transportation services.(31)
Under existing utility tariffs, rates, and procedures, unbundled
transportation of gas is not an economically viable option for
smaller customers. Thus, the MPSC is investigating what steps,
if any, should be taken to allow such customers to participate in
the competitive natural gas market.
E. Tennessee.
Although the Tennessee Public Service Commission ("TPSC")
has not, to date, instituted a proceeding to mandate unbundling
of gas transportation services, the utilities regulated by the
TPSC have filed, and the TPSC has accepted, tariffs that provide
for nondiscriminatory transportation of gas owned or purchased by
a retail customer, subject to the capacities of their respective
systems.
For example, United Cities Gas Company offers transportation
service on either an interruptible or firm basis to any
commercial or industrial customer that has an annual usage of
greater than 270,000 Ccf.(32) Nashville Gas Company offers
transportation service on either an interruptible or firm basis
to any customer that has a minimum annual usage of 6,000
dekatherms.(33) And Chattanooga Gas Company offers interruptible
transportation service to any customer consistently using an
interruptible minimum daily volume of 100 Mcf, and interruptible
transportation service with firm gas supply backup to any
customer consistently using a minimum of 73,000 Mcf annually at
daily rates of at least 200,000 cf or 2,000 therms.(34)
The tariffs filed by the above utilities have permitted
competition in Tennessee. In 1995, natural gas delivered for the
account of others to industrial customers accounted for 65% of
total deliveries to industrial customers in Tennessee.(35) Also
during 1995, natural gas delivered for the account of others to
commercial customers accounted for 14% of total deliveries to
commercial customers in Tennessee.(36)
F. Virginia.
Following FERC's issuance of the proposed rulemaking in the
Order 436 proceeding, in 1986 the Virginia State Corporation
Commission ("VSCC") instituted a proceeding to investigate the
availability of transportation services provided by Virginia
LDC's to industrial customers.(37) As a result of this
investigation, VSCC adopted the Order, which encouraged the
unbundling of LDC transportation and distribution services. The
purpose of the Order is to facilitate gas transportation within
Virginia by providing broad guidance on unbundling to LDC's while
allowing individual transportation tariffs to detail specific
terms and conditions of transportation service. Although the
Order does not mandate unbundled transportation and distribution
services, VSCC promotes competition by reviewing individual
company practices in rate cases to assure that each company
maximizes utilization of its system.
Consistent with the intent of the Order, Virginia's LDC's
have filed tariffs providing for unbundled transportation
services. For example, Commonwealth Gas Services, Inc. offers
interruptible transportation service to any nonresidential
customer(38) and large volume transportation service to any
customer with a maximum daily volume of 20,000 Mcf per day or
greater.(39) Also, Virginia Natural Gas, Inc. offers firm
transportation services (i) to any high load customer with annual
usage in excess of 12,000 Mcf and (ii) to any customer with
annual usage in excess of 2,000 Mcf.(40)
The success of the Order in promoting competition in
Virginia is evidenced by the fact that in 1995 natural gas
delivered for the account of others to industrial customers
accounted for 88% of total deliveries to industrial customers in
Virginia.(41) Although the Order included only industrial
customers, the Virginia gas utilities have voluntarily filed
tariffs offering unbundled service to commercial customers. For
example, during 1995 natural gas delivered for the account of
others to commercial customers accounted for 19% of total
deliveries to commercial customers in Virginia.(42)
G. West Virginia.
Following FERC's issuance of Order 436, the Public Service
Commission of West Virginia ("PSCWV") instituted a proceeding to
develop rules governing gas transportation services within West
Virginia.(43) Pursuant to General Order 228, the PSCWV adopted
Rules and Regulations Governing the Transportation of Natural Gas
("Rules"), one purpose of which is to provide a framework within
which transporters of natural gas could maximize the benefits of
open access to local and interstate gas supplies for West
Virginia customers.(44) The Rules govern the unbundling of LDC
transportation and distribution services for end-use customers.
The Rules provide that each natural gas utility and
intrastate pipeline subject to the jurisdiction of the PSCWV must
provide nondiscriminatory transportation of customer-owned gas to
persons requesting such service over the existing facilities of
the utility or pipeline, subject to the capacity of the system.
All transportation tariffs filed by utilities and pipelines are
required to provide for unbundled services such as firm and
interruptible and such other selections as the PSCWV may from
time to time approve.
The success of the Rules in promoting competition in West
Virginia is evidenced by the fact that in 1995 natural gas
delivered for the account of others to industrial customers
accounted for 87% of total deliveries to industrial customers in
West Virginia.(45) Also during 1995, natural gas delivered for
the account of others to commercial customers accounted for 49%
of total deliveries to commercial customers in West Virginia.(46)
H. California.
Following FERC's issuance of the proposed rulemaking in the
Order 436 proceeding, the California Public Utilities Commission
("CPUC") instituted a proceeding to investigate the availability
of long-term transportation service for customer-owned natural
gas.(47) Pursuant to the 85-12-102 Proceeding, CPUC adopted an
Order requiring California's large gas utilities to unbundle
their transportation and distribution services for high-demand
end-use customers desiring firm long-term (greater than five
years) services. Subsequently, CPUC instituted a proceeding to
investigate the availability of short-term transportation service
for customer-owned natural gas.(48) Pursuant to the 86-03-057
Proceeding, CPUC adopted an order requiring California's large
gas utilities to unbundle all of their transportation and
distribution services for high-demand end-use customers. CPUC
believed that unbundling such services would increase
competition, lead to lower gas costs and reduce, if not
eliminate, the risk of sudden gas price swings. Together, these
Orders required California's large gas utilities to provide
unbundled transportation service for gas owned, obtained or
purchased by any high-demand end-user, subject to the capacity of
the utility's system. By requiring unbundling, the Orders foster
CPUC's express public policy of increasing competition in the
retail sale of natural gas.
The success of the Orders in bringing competition to retail
gas sales in California is evidenced by the fact that in 1995
natural gas delivered for the account of others to industrial
customers accounted for 87% of total deliveries to industrial
customers in California.(49) Also during 1995, natural gas
delivered for the account of others to commercial customers
accounted for 48% of total deliveries to commercial customers in
California.(50)
I. New York.
The New York Public Service Commission ("NYPSC") instituted
a proceeding to investigate the availability of gas
transportation services provided by New York LDC's to end-use
customers prior to the FERC's issuance of the proposed rulemaking
in the Order 436 proceeding.(51) As a result of Case 28672,
NYPSC adopted gas transportation guidelines ("Guidelines")
governing the unbundling of LDC transportation and distribution
services for end-use customers. The purpose of the Guidelines is
to create a more favorable competitive environment for the
production and transmission of natural gas by providing general
guidelines to LDC's while allowing individual transportation
tariffs and special contract language to detail specific
conditions of service, including special customer needs.
The Guidelines provide that all New York gas distribution
utilities (unless exempted by NYPSC) must file tariffs offering
gas transportation service for customer-owned gas. Such service
must be provided to all qualifying customers(52) on a
nondiscriminatory basis, subject to the capacity of the utility's
system. All transportation tariffs filed by the utilities are
required to provide for unbundled services such as firm and
interruptible and such other selections as NYPSC may from time to
time approve.
The success of the Guidelines in promoting competition in
New York is evidenced by the fact that in 1995 natural gas
delivered for the account of others to industrial customers
accounted for 87% of total deliveries to industrial customers in
New York.(53) Also, during 1994 (the last year for which figures
are available), natural gas delivered for the account of others
to commercial customers accounted for 21% of total deliveries to
commercial customers in New York.(54)
NYPSC instituted a proceeding in 1993 to examine the issues
associated with the restructuring of the emerging competitive
natural gas market, the purpose of which was to further
deregulate the natural gas market while fostering consumer
protection and maximizing competitive benefits(55). The
deregulation framework was designed to assure that incumbent
LDC's and new entrants could compete, that all customers benefit
from increased choices and improved performance resulting from a
more competitive industry and the core customers continue to
receive quality service at affordable rates.
One key element of Case 93-G-0932 is that for the first time
under NYPSC rules, residential and small commercial customers are
authorized to combine into a group and aggregate their demand
such that the group would be treated as a single customer for
which a pool of gas could be acquired and delivered to the LDC.
By aggregating demand, residential and small commercial customers
will be able to take advantage of the lower prices available in
the competitive marketplace, much like industrial and large
commercial customers have done for years. In fact, Case 93-G-
0932 supersedes the Guidelines and establishes a new framework
for unbundled transportation services offered to industrial,
commercial and residential customers.
In March, 1996 NYPSC implemented the framework set forth in
Case 93-G-0932 for unbundling and restructuring LDC services by
requiring most New York LDC's to file new tariffs complying with
the requirements set forth therein. New York thus became the
first state to implement broad-based restructuring of its natural
gas market for industrial, commercial and residential customers.
IV. Conclusion.
The retail natural gas market has undergone profound changes
in the last twenty years. Whereas rates were once fixed from the
production field to the burner tip, today there is competition at
the wellhead and for the retail customer. FERC and the state
regulatory commissions have consistently held that competition in
the retail natural gas market is in the public interest and have
encouraged pipelines and LDC's to unbundle their transportation
and distribution services. As a result, the vast majority of
natural gas purchased by industrial customers is transported, but
not sold, by the LDC, and an increasing number of commercial
customers are purchasing their own gas for delivery by the LDC.
Although this Memorandum examines the unbundling efforts of
nine states, all forty-nine continental states, Canada and Mexico
have adopted public policies favoring competition in the retail
natural gas market to some degree. Retail sales of natural gas
by other than the LDC, unlike retail power sales, are currently
permitted in every state. Thus, the proposed AEP marketing
subsidiaries could begin selling natural gas to industrial and
commercial customers immediately. And, as evidenced by the
NYPSC's recent order, the proposed AEP marketing subsidiaries
eventually will be permitted to sell gas to residential customers
in all states, and could in New York state today. Authorizing
the AEP marketing subsidiaries to sell natural gas at retail will
increase competition in the natural gas market, and therefore
benefit all natural gas customers.
NOTES
(1) Please see the Supplemental Memorandum included herewith for
a discussion of the deregulation of the interstate natural gas
market.
(2) United States Department of Energy's Energy Information
Administration 1994 Annual Energy Review and Natural Gas Monthly
(February 1996). "Deliveries for the account of others" are
deliveries to customers by transporters that do not own the
natural gas but deliver it for others for a fee.
(3) Energy Information Administration Natural Gas Monthly
(February 1996).
(4) See, supra, Note 2.
(5) See, supra, Note 3.
(6) Foster Report No. 2063 at p.18 (January 18, 1996).
(7) See, supra, Note 6.
(8) See, supra, Note 6.
(9) Case No. 85-800-GA-COI (August 20, 1985) (the "85-800
Proceeding"). PUCO issued its initial Finding and Order on April
15, 1986, and supplemental Entries were made on August 13, 1986,
November 24, 1993, October 13, 1994, December 1, 1994, March 29,
1995, September 14, 1995 and November 2, 1995. In the initial
Finding and Order, at least one PUCO commissioner believed that
"gas distribution companies in Ohio have been voluntary common
carriers for a decade."
(10) The Cincinnati Gas & Electric Company, Rates IT, FT and ICT.
(11) Columbia Gas of Ohio, Inc., Rates SGTS, GTS and LGTS.
(12) See, supra, Note 3. Onsystem sales to industrial customers
represented only 5% of total sales to industrial customers in
Ohio during 1995.
(13) See, supra, Note 3. Onsystem sales to commercial customers
represented 75% of total sales to commercial customers in Ohio
during 1995.
(14) Amended Substitute House Bill 476, Ohio 121st General
Assembly, 1995-96 Regular Session.
(15) Comments of Representative Amstutz, Amended Substitute House
Bill 476, Ohio 121st General Assembly, 1995-96 Regular Session.
(16) Indiana Gas Company, Inc., Rate Schedules No. 45 and No. 60.
(17) Citizens Gas & Coke Utility, Gas Rates No. 6 and No. 7.
(18) Northern Indiana Public Service Company, Rates 328 and 338.
(19) See, supra, Note 3. Onsystem sales to industrial customers
represented only 15% of total sales to industrial customers in
Indiana during 1995.
(20) See, supra, Note 3. Onsystem sales to commercial customers
represented 86% of total sales to commercial customers in Indiana
during 1995.
(21) Kentucky Public Service Commission Administrative Case No.
297 (May 29, 1987) (the "Proceeding").
(22) Even before the Order was issued, however, several Kentucky
LDC's filed tariffs offering rates for gas transportation apart
from natural gas sales rates, thus enabling them to compete with
other gas marketers. Those filing such tariffs included the five
largest Kentucky LDC's: Columbia Gas of Kentucky, Inc., Delta
Natural Gas Company, Inc., Louisville Gas and Electric Company,
The Union Light, Heat and Power Company and Western Kentucky Gas
Company.
(23) See, supra, Note 3. Onsystem sales to industrial customers
represented only 23% of total sales to industrial customers in
Kentucky during 1995.
(24) See, supra, Note 3. Onsystem sales to commercial customers
represented 88% of total sales to commercial customers in
Kentucky during 1995.
(25) Michigan Public Service Commission Case No. U-7991
(September 26, 1985 and December 17, 1986).
(26) Id. See e.g., Michigan Public Service Commission Case No.
U-8635 (December 17, 1985).
(27) Michigan Consolidated Gas Company, Rate Schedules No. ST-1,
No. ST-2, No. LT-1, No. LT-2, No. TWH-1, No. TWH-2, No. TOS-1,
and No. TOS-2.
(28) Consumers Power Company Service Rates ST-1, ST-2, LT-1, LT-
2.
(29) See, supra, Note 3. Onsystem sales to industrial customers
represented only 7% of total sales to industrial customers in
Michigan during 1995.
(30) See, supra, Note 3. Onsystem sales to commercial customers
represented 64% of total sales to commercial customers in
Michigan during 1995.
(31) Michigan Public Service Commission Case No. U-11017 (January
11, 1996).
(32) United Cities Gas Company Schedule 260.
(33) Nashville Gas Company Rate Schedules No. 7F and No. 7I.
(34) Chattanooga Gas Company Rate Schedules T1 and T2.
(35) See, supra, Note 3. Onsystem sales to industrial customers
represented only 35% of total sales to industrial customers in
Tennessee during 1995.
(36) See, supra, Note 3. Onsystem sales to commercial customers
represented 86% of total sales to commercial customers in
Tennessee during 1995.
(37) Virginia State Corporation Commission Case No. PUE860024
(April 4, 1986) and Case No. PUE860024 Opinion and Order
(September 9, 1986) (collectively, the "Order"). The basis for
the Order was VSCC's belief that "the increase in competition in
the natural gas industry has clearly been in the public interest"
and that "increased competition and transportation are in the
public interest."
(38) Commonwealth Gas Services Rate Schedules TS1 and TS2.
(39) Commonwealth Gas Services Rate Schedule LVTS.
(40) Virginia Natural Gas, Inc. Rate Schedules 6 and 7.
(41) See, supra, Note 3. Onsystem sales to industrial customers
represented only 12% of total sales to industrial customers in
Virginia during 1995.
(42) See, supra, Note 3. Onsystem sales to commercial customers
represented 81% of total sales to commercial customers in
Virginia during 1995.
(43) Public Service Commission of West Virginia General Order 228
(March 11, 1987). In fact, in granting the PSCWV the authority
to regulate the transportation of natural gas within West
Virginia, the West Virginia legislature found that "it is in the
best interest of the citizens of West Virginia to encourage the
transportation of natural gas in intrastate and interstate
pipelines or by local distribution companies in order to provide
competition in the natural gas industry and in order to provide
natural gas to consumers at the lowest possible price."
(44) Public Service Commission of West Virginia Legislative
Rules, Title 150, Chapter 24-1, Series 16 (March 11, 1987), as
amended to September 1, 1995.
(45) See, supra, Note 3. Onsystem sales to industrial customers
represented only 13% of total sales to industrial customers in
West Virginia during 1995.
(46) See, supra, Note 3. Onsystem sales to commercial customers
represented 51% of total sales to commercial customers in West
Virginia during 1995.
(47) California Public Utilities Commission Decision No. 85-12-
102 (October 17, 1985), as supplemented by an Entry on December
20, 1985 ("85-12-102 Proceeding").
(48) California Public Utilities Commission Decision No. 86-03-
057 (March 19, 1986) ("86-03-057 Proceeding").
(49) See, supra, Note 3. Onsystem sales to industrial customers
represented only 13% of total sales to industrial customers in
California during 1995.
(50) See, supra, Note 3. Onsystem sales to commercial customers
represented 52% of total sales to commercial customers in
California during 1995.
(51) New York Public Service Commission Case 28672; Opinion 84-13
(April 24, 1984), as amended by Revisions on May 7, 1985 ("Case
28672").
(52) A customer was required to have a minimum volume of 25,000
Mcf per year, effectively eliminating residential customers from
the tariffs.
(53) See, supra, Note 3. Onsystem sales to industrial customers
represented only 13 of total sales to industrial customers in New
York during 1995.
(54) See, supra, Note 3. Onsystem sales to commercial customers
represented 79% of total sales to commercial customers in New
York during 1994.
(55) New York Public Service Commission Case No. 93-G-0932
(October 28, 1993), as supplemented by Opinion 94-26 (December
20, 1994), and by Orders issued August 11, 1995 and March 21,
1996 ("Case 93-G-0932").
SUPPLEMENTAL MEMORANDUM REGARDING
REGULATION OF INTERSTATE SALES OF NATURAL GAS
June 18, 1996
In 1938, Congress enacted the Natural Gas Act ("NGA") to
regulate the sale for resale in interstate commerce of natural
gas.(1) Congress' primary aim was to protect consumers against
exploitation by the natural gas companies and to ensure consumers
had access to an adequate supply of gas at a reasonable price.
Under the NGA, the producers would sell their natural gas to the
interstate pipelines at regulated rates. The pipelines would
transport their purchased gas and their own production to the
city gate for sale to the LDC at regulated rates, which recovered
both the pipelines' cost of gas and cost of transmission. In
addition, the pipelines would sell gas to end-users in
nonjurisdictional sales. Producer sales to LDC's or end-users in
the production area, with the pipeline providing only the
transportation, were rare. Thus, the post-NGA natural gas
industry operated under regulated rates and interstate pipelines
sold gas for resale to LDC's at those prices in transactions that
combined or bundled into one package the pipelines' supply and
transmission costs.
Under the NGA, the Federal Power Commission (later, the
Federal Energy Regulatory Commission, or "FERC") was authorized
to regulate both the upstream and downstream sales for resale of
natural gas in interstate commerce, as well as interstate
pipeline transportation rates. Although this regulation
artificially suppressed prices in the regulated interstate gas
market, the intrastate market was not regulated under the NGA,
thereby causing a disparity in natural gas prices and hence
supplies between the interstate and intrastate markets. This
supply imbalance was a major cause of the severe supply shortages
in the 1970s.
In 1978, Congress responded to these natural gas shortages
by enacting the Natural Gas Policy Act of 1978 ("NGPA") to
increase the flow of gas into the interstate market. The NGPA
created new statutory rates for the wholesale gas market, for so-
called "first sales" of natural gas. As part of the new rate
structure, the NGPA initiated the process of decontrolling
wellhead prices of natural gas. Upon decontrol, the NGPA removed
much of the pricing of natural gas supplies from FERC regulatory
jurisdiction. The NGPA's aim was to develop a competitive
wellhead market where market forces played a more significant
role. The NGPA, therefore, radically changed a key aspect of the
natural gas industry by eliminating FERC-determined prices for
first sales of natural gas. Moreover, the NGPA accelerated a
fundamental change in the natural gas industry -- natural gas
became a separate and distinct economic commodity, distinct from
transportation, storage and load balancing services.
Congress and FERC have continued to encourage competition in
the sale of natural gas. In 1985, the FERC issued Order No. 436
("Order 436"), which offered incentives for interstate pipelines
to provide open-access, non-discriminatory transportation to
downstream gas users. Unbundling pipeline transportation allowed
downstream gas users such as LDC's and industrials to buy gas
directly from producers or other gas merchants in the product
area and to ship that gas via the interstate pipelines.(2) Order
436 and its successor, Order 500, provided the LDC's and
industrials with an alternative to buying gas from the pipelines
in the distribution area under the pipelines' bundled sales
service, and thus facilitated direct sales between gas producers
and LDC's and industrials. Order 436 and Order 500 accomplished,
in part, FERC's twin goals of increasing competition in the
natural gas market and treating the sale of gas and the
transportation of gas as separate economic transactions. This
reversed the historical function of pipelines which, prior to
Order 436, acted primarily as gas merchants.
Competition in sale of natural gas proceeded further under
the Natural Gas Wellhead Decontrol Act of 1989, pursuant to which
the FERC implemented full producer deregulation, effective
January 1, 1993. In 1990, Congress enacted the Gas Related
Activities Act ("GRAA"), which permitted registered holding
companies owning gas utilities to acquire significant production
and transportation assets that do not directly serve the needs of
their retail distribution systems.
By 1992, pipelines competed with other sellers of natural
gas for sales to LDC's and end users, such as industrials and
gas-fired electric generators. However, although Order 436
eliminated the discriminatory service practices of the pipelines
that had plagued the industry for decades, it still left
producers and other gas merchants at a competitive disadvantage
in selling gas to LDC's: although non-pipeline merchants were
restricted to offering only sales service, pipelines could still
offer a bundled package of sales, transportation and storage
services. Because access to pipeline storage facilities made
bundled transportation and sales service more reliable and
flexible (by allowing pipelines to offer "firm no-notice"
service), LDC's continued to purchase most of their supplies from
pipelines. Other sellers moved gas through the pipeline network
using mainly interruptible transportation service, a competitive
disadvantage when selling to LDC's and many industrial customers.
In 1992, the FERC issued Order No. 636 ("Order 636"), which
required pipelines to offer a variety of transportation services
to their shippers under a system that treats all gas equally,
whether sold or merely transported by the pipeline companies.(3)
Order 636 required the pipelines to unbundle their sales and
transportation services, provide comparable transportation
services for all gas supplies, offer access to pipeline storage
and allow shippers both temporary or permanent capacity release.
In effect, Order 636 transformed pipelines into exclusively
transporters of natural gas. FERC also issued Order No. 547
("Order 547"), which issued blanket certificates of public
convenience and necessity allowing certificate holders to make
gas sales for resale at negotiated market rates.(4) In tandem
with Order 636, Order 547 was intended to "foster a truly
competitive market for natural gas sales for resale, giving
purchasers of natural gas access to multiple sources of natural
gas and the opportunity to make gas purchasing decisions in
accord with market conditions."(5)
These legislative and regulatory actions demonstrate a clear
federal policy promoting competition among sellers and marketers
of natural gas. As a result, the interstate sale and purchase of
natural gas has developed into an active, competitive commodity
market.
NOTES
(1) For background on the natural gas industry, see The
Regulation of Public-Utility Holding Companies, Report of
the Division of Investment Management, Securities and
Exchange Commission (June 1995), pp. 25-31 (the "Report")
and FERC Order 636 (April 8, 1992), 57 Fed. Reg. 13267, pp.
13270-13272.
(2) 50 Fed. Reg. 42408 (October 18, 1985).
(3) 57 Fed. Reg. 13267 (April 8, 1992).
(4) 57 Fed. Reg. 57952 (November 30, 1992).
(5) Id., at 57953.
Exhibit 1-B
MEMORANDUM REGARDING COMPETITION
IN RETAIL POWER SALES
I. Introduction.
This Memorandum ("Memorandum") is in connection with File
No. 70-8779 ("Application"), in which American Electric Power
Company, Inc. ("AEP"), through direct and indirect subsidiaries,
proposes to engage in the business of brokering and marketing
Energy Commodities, including electricity, to retail and
wholesale customers. In the Application, AEP requested that
jurisdiction be reserved over the brokering and marketing of
electricity at retail pending completion of the file with respect
to the permissibility of such sales. This Memorandum, in
conjunction with Post Effective Amendment No. 1 to the
Application, demonstrates that numerous states are implementing
pilot and other programs whereby sales of electricity at retail
by brokers and marketers are not only permitted but encouraged,
thus providing customers with a choice as to whom will supply
their electricity. This Memorandum provides a summary of such
programs in Illinois, Michigan, Ohio, New York and Pennsylvania.
II. Illinois.
A. Central Illinois Light Company.
Recognizing the growing public demand for competitive
electric service, in August, 1995 Central Illinois Light Company
("CILCO") filed a petition with the Illinois Commerce Commission
("ICC") requesting an order authorizing CILCO to place into
effect two pilot retail wheeling programs whereby CILCO will
unbundle transmission and distribution services.(1) CILCO
petitioned for the pilot programs in anticipation of the
emergence of a competitive market for retail electric service and
to acquire information and experience with regard to retail
wheeling in Illinois. Finding that the pilot programs are in the
public interest and could reasonably be expected to provide
useful experience and information concerning suppliers,
aggregators and customers of retail wheeling, the ICC approved
both pilot programs on March 13, 1996, to be effective upon
CILCO's filing of the tariffs described below.
One of the programs, Rate 33, is designed to last for a
period of two years and will be available to CILCO's customers
having demands of ten megawatts ("MW") or greater on CILCO's
electric system at any time during the twelve months ending July
31, 1995. CILCO's eight largest customers will be eligible to
elect Rate 33. Rate 33 permits these customers to reserve, in
the aggregate, up to 50 MW of CILCO's transmission and
distribution capacity for the delivery of electricity purchased
from other suppliers, including other electric utilities,
aggregators and other marketers and brokers. A customer choosing
Rate 33 must pay for the contracted transmission and distribution
capacity whether such capacity is actually used for delivery of
its non-CILCO purchases. Any usage by a participating customer
which is not purchased off-system will be supplied by CILCO under
its otherwise applicable rates except during certain capacity
deficient periods. Under Rate 33, a participating customer is
allowed to reduce or totally eliminate its level of participation
upon 24 hours' notice. If a customer exercises this option, it
may not increase or initiate new capacity reservation for 90
days, subject to the availability of capacity.
The second pilot program, Rate 34, is designed to last five
years and will be available to all customers located within
specific geographic areas called "open access sites". Current
plans call for CILCO to designate at least three open access
sites. Site 1 will be a municipality that contains at least 400
to 500 residential customers along with some commercial
customers. Site 2 will consist of an undeveloped area of at
least 20 acres zoned for commercial or light industrial use.
Site 3 will be an area with existing commercial businesses whose
electric usage ranges from small to relatively large within the
commercial class. The total off-system load expected to be
served under Rate 34 will not exceed 25 MW.
Rate 34 residential customers will be required to purchase
all of their capacity off-system due to their small usage and
lack of time-of-use demand meters. For all other participants,
there will be no minimum or maximum purchase requirement on Rate
34. Like Rate 33 customers, all Rate 34 customers can withdraw
from participation on 24 hours' notice, but must wait 90 days to
return if they elect to do so, and non-residential Rate 34
customers must purchase their full contracted capacity off-system
during capacity deficient periods. Customers participating in
either program may utilize aggregators to consolidate their
electric requirements. CILCORP, Inc., a subsidiary of CILCO's
parent, is planning to act as an aggregator for customers
eligible for Rate 33 or Rate 34.
In order to implement the pilot programs under Rate 33 and
Rate 34, CILCO will unbundle rates for transmission and
distribution services. The charges proposed for retail
transmission service for Rate 33 and Rate 34 are identical to
CILCO's transmission charges for wholesale energy filed with the
Federal Energy Regulatory Commission ("FERC") pursuant to FERC's
wholesale open access rules.
B. Illinois Power Company.
In September, 1995, Illinois Power Company ("IPC") filed
tariff SC 37 for the purpose of offering a retail wheeling
program entitled Direct Energy Access Service ("DEAS").(2)
Tariff SC 37 was filed in response to customer demands for more
choice, better service and competitive pricing. IPC stated that
tariff SC 37 will provide experience for both IPC and its
customers in operating in a competitive retail environment and
act as another step in the process of achieving a managed
transition toward a more fully competitive retail environment.
Finding that tariff SC 37 was just and reasonable, ICC authorized
IPC to place the tariff into effect on March 13, 1996. In
addition, the ICC directed IPC to perform a study on the
feasibility of conducting an experimental or pilot retail direct
access program for residential and commercial customers and to
file a report thereon by March 13, 1997.
Pursuant to tariff SC 37, IPC will waive its first in the
field rights to the extent necessary to allow third party energy
suppliers to sell power to DEAS customers within the scope of the
program. IPC will offer a maximum of 50 MW of DEAS capacity,
with no more than 30 MW to be served in any one of the three
geographic regions in IPC's service territory. DEAS will be
offered until December 31, 1999, so long as at least eight
customers and 30 MW of load remain on tariff SC 37. DEAS
eligibility requirements provide that a customer must have had a
demand of at least 15 MW during the 24 months ended September 1,
1995. The customer must also take service at a delivery voltage
of 34.5 kv or above. Under tariff SC 37, an eligible customer
may transfer between 2 MW and 10 MW in whole MW's (subject to the
50 MW total and 30 MW per region maximum availability) of its
firm load service on an IPC sales service tariff or contract to
DEAS. IPC will provide transmission and ancillary services using
the rates, terms and conditions of IPC's open access tariff on
file with the FERC, as amended to make such tariff applicable to
eligible DEAS customers.
Under the DEAS program, a customer is responsible for
procuring its own capacity and energy supplies from third
parties, as well as any transmission over intervening systems
necessary to reach the IPC control area interconnection point.
DEAS load may not be served on IPC sales service tariffs or
contracts, and IPC will have no obligation to serve DEAS load
except in accordance with ancillary services purchased by the
customer. A DEAS customer may leave the program, or reduce its
DEAS demand to not less than 2 MW, one time during the program.
The customer would be responsible for any remaining third-party
transmission arrangements it had entered into.
III. Michigan.
A. Experimental Retail Wheeling Tariffs.
Pursuant to an application filed by the Association of
Businesses Advocating Tariff Equity ("ABATE"), in September, 1992
the Michigan Public Service Commission ("MPSC") commenced a
contested case proceeding whereby experimental retail wheeling
programs would be considered for Consumers Power Company
("Consumers") and The Detroit Edison Company ("Detroit
Edison").(3) In April, 1994, the MPSC issued its Opinion and
Interim Order(4) in the Cases requiring Consumers and Detroit
Edison to implement experimental retail wheeling programs (as
described more fully herein)(5), the purpose of which was to
"determine whether a retail wheeling program best serves the
public interest in a manner that promotes retail competition"(6).
The experimental retail wheeling programs were further refined in
an Opinion and Order issued in June, 1995(7), and an Order on
Rehearing issued in September, 1995.(8) Pending the outcome of
an appeal filed by Detroit Edison (and joined by Consumers) with
the Michigan Court of Appeals, both Consumers and Detroit Edison
have declined to implement the experimental retail wheeling
programs called for in the Cases.(9)
As envisioned by the MPSC, prior to the commencement of
retail wheeling operations, each utility would file, in
conjunction with its next round of proceedings for soliciting new
capacity, an experimental tariff incorporating the rates, terms
and conditions established in the Cases for an unbundled, firm
delivery-only service. The utilities would be required to offer
firm retail delivery service with capacity limits of 90 MW for
Detroit Edison and 60 MW for Consumers, or approximately 1% of
each utility's peak demand.
Participating customers would be required to sign contracts
with the utility in which the customer would commit to refrain
from taking full retail service for an amount of power equal to
their allotment of firm delivery during the five-year experiment.
Participating customers also would assume the responsibility for
making all arrangements necessary to procure power from third-
party providers -- either directly or through aggregators such as
the AEP marketing subsidiaries -- and to have the power delivered
to the local utility's system. The utilities would be
responsible only for providing unbundled delivery service to the
customer's service location. Eligible customers would be limited
to transmission and subtransmission level customers, and each
customer would be required to contract for between 2 and 10 MW of
retail wheeling capacity.
Although ABATE recommended that rates, terms and conditions
of power purchases from third-party providers be deregulated, the
MPSC believed that its enabling statutes required it to regulate
the rates, charges, services, rules and conditions of service
attendant to the sale of power to an end-user located in
Michigan. Thus, the MPSC held that contracts or other
arrangements made by retail wheeling customers to purchase power
from third-party providers must be submitted to the MPSC for
authorization of the rates, terms and conditions of the sale
prior to the inception of service.
Under the program, participants would be able to return to
full utility service after the program's expiration on the same
terms available to any non-participating customer. If a
participant in the program decides to return to full utility
service prior to the program's expiration, it may take service
under any rate for which it qualifies, although such customers'
load would be served from incremental generation or power supply
resources beyond those required to serve the utility's other
retail customers. The incremental power supply costs associated
with the most expensive source of fuel or purchased power would
be assigned to such returning customer in addition to other
charges provided by the tariff.
B. Michigan Jobs Commission.
The Michigan Jobs Commission ("MJC") recently issued
recommendations for electric and gas utility reform in Michigan
to encourage economic development.(10) The Recommendations focus
primarily on the electric utility industry, address industrial
and commercial customers only, and outline a set of principles
which the MPSC, the Michigan legislature and other affected
parties should consider to improve Michigan's competitiveness in
attracting businesses. The MJC also recommended that these
interested parties issue a challenge to other states to open
their regulatory systems with similar actions to allow for
interstate energy competition. The Recommendations have been
endorsed by Governor John Engler(11) and the MPSC(12).
The Recommendations consist of near term (to be achieved by
January 1, 1997), intermediate term (to be achieved by January 1,
1998) and long term (to be achieved by January 1, 2001) goals.
Among the near term goals are:
1. Allowing all new industrial and commercial electric
load to be negotiated directly from the generator and
wheeled over common transmission. The MPSC would
unbundle tariffs into functional components, set a
minimum level of load that can be negotiated directly
and ensure that all retail wheeling agreements are
reciprocal.
2. Addressing stranded cost by giving shareholder owned
utilities a greater opportunity to prepare for market
competition.
3. Exploring ending rate of return regulation and replace
it with rate cap regulation for all load that is not
wheeled.
4. Allowing immediate "file and use" tariffs for all
existing industrial and commercial load not wheeled,
but negotiated through bilateral contracts.
The intermediate goal calls for creating an independent wholesale
power pool whereby all who generate power may sell to the pool;
however, to be able to sell to the pool, utilities must also have
reciprocal agreements to buy from and market the pool. Long
term, the Recommendations call for allowing industrial and
commercial rate classes to aggregate demand, purchase retail
electricity, negotiate bilateral agreements and buy wholesale
power.
On April 12, 1996, the MPSC issued an order requiring all
electric utilities subject to its jurisdiction to file with the
MPSC proposals addressing the MJC's recommendations. The two
largest companies, Consumers and Detroit Edison, were ordered to
file their applications by May 15, 1996, and the remaining
electric utilities were ordered to file their applications by
June 14, 1996.
Both Consumers and Detroit Edison filed their respective
Applications.(13) The companies' Applications propose tariffs
whereby new load customers may purchase generation service from
any eligible power supplier capable of delivering power to the
respective companies' systems, with the company delivering that
power to the new load customer. Both Consumers and Detroit
Edison requested that the MPSC address all of the near term
Recommendations in an integrated, comprehensive package prior to
implementing the proposed open-access tariffs.
On June 14, 1996, the other electric utilities filed
applications with the MPSC. Indiana Michigan Power Company
(I&M), a subsidiary of American Electric Power Company, Inc.,
filed a proposed open access distribution tariff, as did other
electric utilities. I&M and the others asked that the MPSC adopt
their respective tariffs without hearings.
IV. OHIO.
Recognizing the "increasingly competitive nature of the
electric utility industry,"(14) The Public Utilities Commission
of Ohio ("PUCO") recently issued an Entry requesting comments on
proposed conjunctive electric service guidelines ("Guidelines").
The Guidelines were issued pursuant to Initiative No. 37 of the
Ohio Energy Strategy wherein the PUCO committed to "promote
increased competitive options for Ohio businesses."(15) The
Guidelines are intended to facilitate a pilot project with an
initial term of two years. Interested parties already have filed
initial comments on the Guidelines, and further comments will be
filed prior to PUCO acting on this matter.
For purposes of the Guidelines, conjunctive electric service
is defined as the quality and nature of the service provided
under the terms and conditions of a utility's applicable electric
service tariff, contract or agreement under which different
customer service locations are aggregated for cost-of-service,
rate design, rate eligibility and billing purposes. The
conjunctive electric service contemplated by the Guidelines is
distinctly different from traditional conjunctive billing. Under
traditional conjunctive billing, different service locations of a
customer are aggregated and then billed under an existing tariff.
In this manner, the customer is able to reduce the level of
kilowatt billing units under the existing tariff by capturing the
benefits of load diversity that exist among different service
locations. Traditional conjunctive billing thus unfairly
discriminates against nonparticipating customers. Under the
Guidelines, conjunctive electric service rates will either be
designed on a cost-of-service basis or revenue neutral basis for
each specific group and as such will not discriminate against
nonparticipating customers.
The Guidelines would limit conjunctive electric service
under tariff, contract or agreement to customer service locations
within the certified service area of each electric public utility
within the State of Ohio. Further, the rates for conjunctive
electric service will be developed specific to each group of
customers. The function of aggregating groups of customers could
be performed by persons in addition to the electric utility
companies. That is, third parties such as the AEP marketing
subsidiaries could aggregate groups of customers.
V. New York.
The New York Public Service Commission ("NYPSC") began an
investigation into the restructuring of the electric utility
industry in 1993 by considering guidelines for the implementation
of flexible pricing and the use of negotiated contracts for
customers with competitive options. In August, 1994, the NYPSC
instituted an investigation into issues related to the provision
of electric service in light of competitive opportunities.(16)
On May 20, 1996, the NYPSC issued its Opinion and Order Regarding
Competitive Opportunities for Electric Service(17), wherein the
NYPSC set forth its vision of the future regulatory regime and
the goals expected to be achieved thereby, and described the
strategies that should be implemented to achieve those goals.
Recognizing that retail competition has the potential to
benefit all customers by providing greater choice among
electricity providers, the NYPSC intends to move toward a
competitive power market in two major phases. The first phase is
to take place from the date of the Opinion and end on October 1,
1996. During this time, each of the seven major electric
utilities in New York must file a rate/restructuring plan with
the NYPSC and FERC. This filing will distinguish and classify
transmission and distribution facilities and delineate those
facilities over which FERC may have authority versus those that
are local in character and subject to NYPSC jurisdiction. In
addition, the utilities are to make two joint filings, one
addressing transmission pricing and the other addressing the
formation of an independent system operator. The second phase
will take place as the utility filings are dealt with in the
instant proceeding or otherwise reviewed. The entire process is
geared to the establishment of a competitive wholesale power
market early in 1997 and the introduction of retail access early
in 1998. One of NYPSC's stated goals during this short wholesale
phase is to develop effective competition among energy service
companies, such as the AEP marketing subsidiaries and other power
marketers and brokers.
VI. Pennsylvania.
In April, 1994, the Pennsylvania Public Utility Commission
("PPUC") instituted an Investigation to examine the structure,
performance and role of competition in Pennsylvania's electric
utility industry.(18) The Investigation culminated on July 3,
1996, when PPUC issued its Report and Recommendation(19), wherein
the PPUC recommended that Pennsylvania begin a transition that
will end the regulation of electric generation as a monopoly.
Although the Report recommends a transition period of five years,
if the prerequisites to instituting full retail competition are
reasonably satisfied within a shorter time frame, the transition
period could be as short as three years.
The Report provides for the restructuring of Pennsylvania's
electric service industry pursuant to a two stage implementation
process. The first stage, the transition period, was to begin
immediately and will be used, among other things, to restructure
the industry, provide needed legislation, establish an effective
and reliable wholesale bulk power market and introduce retail
pilot programs. After completion of the transition period, a
phase-in period will be provided to incrementally move to full
retail competition. PPUC expects to begin competitive retail
access pilot programs for all customer classes beginning in
April, 1997, and to begin the incremental introduction of
competitive retail access for all customers during 2001, with all
customers having retail access opportunities by January, 2005, at
the latest.
According to the PPUC, an increased variety of pricing
options and customer choice, including choice among suppliers of
electricity, should be the hallmarks of the developing
competitive retail power market. As such, the PPUC believes that
customers should have several options for generation services,
including receipt of electricity from the local distribution
utility (either directly or in the LDU's capacity as an
aggregator), from a particular generator through a direct
contract, or through aggregators (such as marketers and brokers)
licensed by the PPUC. Thus, as currently proposed, the
Pennsylvania pilot programs would permit the AEP marketing
subsidiaries to market and broker power to retail customers.
VII. Conclusion.
Due to programs such as those cited in this Memorandum, as
well as those in states such as Massachusetts and New Hampshire,
competition in the retail power market is developing rapidly.
The state commissions have consistently held that competition in
the retail power market is in the public interest. The
Securities and Exchange Commission also has held that competition
in the retail power market is in the public interest:
The Commission has recognized the need to apply
the standards of sections 9(a)(1) and 10, and, by
reference, section 11(b), in light of the "changing
realities of the utility industry." In that regard,
the Commission has noted, among other things, the
national policy to promote efficient and competitive
energy markets. The Commission has acknowledged that
participation of registered system companies in energy
marketing and brokering activities may promote greater
competition and thus further the public interest in a
sound electric and gas utility industry. These
concerns extend to competition in retail as well as
wholesale markets.(20)
The state commissions have stressed that increasing customer
choice is one key to developing a competitive retail power
market. As such, the pilot programs invariably provide customers
with several options for generation services, including purchases
from aggregators and other marketers and brokers licensed by the
state commission. The various state commissions have
acknowledged that the success of the pilot programs depends upon
the entry of new suppliers into the retail power market. Thus,
as currently proposed, the pilot programs would permit the AEP
marketing subsidiaries to market and broker power to retail
customers.
Although competition in the retail power market is not as
developed as in the natural gas market(21), the pilot programs
either implemented or under consideration by numerous states
should quickly lead to competitive sales of electricity in the
retail power market. In fact, the AEP marketing subsidiaries
could begin selling power immediately in Illinois, Massachusetts
and New Hampshire. Eventually, the AEP marketing subsidiaries
may be permitted to sell power to customers in all states. As
noted above, authorizing the AEP marketing subsidiaries to sell
electricity at retail will increase competition in the retail
power market, and therefore benefit all power customers.
NOTES
1. Illinois Commerce Commission, Order issued on Petition No.
95-0435 (March 13, 1996).
2. Illinois Commerce Commission, Order issued on Petition No.
95-0494 (March 13, 1996).
3. Michigan Public Service Commission, Order issued in Case No.
U-10143 and Case No. U-10176 (September 11, 1992) (as modified by
subsequent Orders, the "Cases").
4. Michigan Public Service Commission, Opinion and Interim
Order issued in Case No. U-10143 and Case No. U-10176 (April 14,
1994).
5. As used by the MPSC, "retail wheeling" refers to a local
utility's delivery of power to an end-user located in its service
territory. As used by the MPSC, retail wheeling differs from
full retail electric service in that power is not provided by
the utility out of its own system resources, but instead the end-
user (or retail wheeling customer) assumes the responsibility for
arranging for the purchase of power and its transmission to the
local utility's system. Michigan Public Service Commission,
Opinion and Interim Order issued in Case No. U-10143 and Case No.
U-10176 (April 14, 1994).
6. Michigan Public Service Commission, Opinion and Interim
Order issued in Case No. U-10143 and Case No. U-10176 (April 14,
1994).
7. Michigan Public Service Commission, Opinion and Order after
Remand issued in Case No. U-10143 and Case No. U-10176 (June 19,
1995).
8. Michigan Public Service Commission, Order on Rehearing
issued in Case No. U-10143 and Case No. U-10176 (September 7,
1995).
9. Michigan Court of Appeals Docket Nos. 187387, 187388, 189480
and 189481.
10. Michigan Jobs Commission, "A Framework for Electric and Gas
Utility Reform" (December 20, 1995) (the "Recommendations").
11. Letter from Governor John Engler to the Honorable John G.
Strand, Chairman of the Michigan Public Service Commission
(January 8, 1996).
12. Michigan Public Service Commission, Scheduling Order in Case
No. U-11076 (April 12, 1996). The MPSC directed Consumers and
Detroit Edison to file applications that would allow new
industrial and commercial electric load to be negotiated directly
from the generator and wheeled over common transmission.
Consumers and Detroit Edison were required to, and did, file such
applications.
13. Consumers Power Company, "In the Matter of the Application
of Consumers Power Company for Approval of an Open Access-New
Load Delivery Service Tariff and Related Relief", filed in Case
No. U-110076 (May 15, 1996) and The Detroit Edison Company,
"Application of The Detroit Edison Company for Approval of
Principles for Direct Customer Access and an Interim Economic
Growth Electric Service Rider for New Electrical Load
Installations in Michigan", filed in Case No. U-11076 (May 15,
1996).
14 The Public Utilities Commission of Ohio, Case No. 96-406-EL-
COI at 1 (May 8, 1996)(the "Order").
15. Id.
16. New York Public Service Commission, Case No. 94-E-0952, "In
the Matter of Competitive Opportunities Regarding Electric
Service," (August 9, 1994).
17. New York Public Service Commission, Opinion No. 96-12 (May
20, 1996) (the "Opinion").
18. Pennsylvania Public Utilities Commission Docket No. I-
00940032, "Investigation into Retail Competition" (April 14,
1994) (the "Investigation").
19. Pennsylvania Public Utilities Commission, Report and
Recommendation to the Governor and General Assembly on Electric
Competition (July 3, 1996) (the "Report").
20. Securities and Exchange Commission Release No. 35-26519 (May
23, 1996) (citations omitted) (Eastern Utilities Associates, File
No. 70-8769) and Release No. 35-26520 (May 23, 1996) (citations
omitted) (New England Electric System, File No. 70-8803).
21. See Exhibit I-A to Post Effective Amendment No. 1, File No.
70-8779, "Memorandum Regarding Competition in Retail Sales of
Natural Gas."
