Kentucky utilities wants PUHCA exemption

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Shames, head of the San Diego

affiliate Mission Energy The

consumer group Utility Consum-

CPUC’s Division of Ratepayer Ad-

interpretation.

ers Action Network (UCAN)

vocates earlier this year accused

is no legal basis for declaring the

which opposes the merger, says

Edison of negotiating anticompeti-

merger a transfer of the fran-

emphatically, ‘Yes, it lights a fire

tive “sweetheart deals” with Mis-

chise,” and the company “be-

under the seats of the commission-

sion, a charge that Edison vigor-

lieves it has the precedent of law

ers to make specific findings.

on its side.”

They are compelled to do certain

ously refutes. Rosenthal is planning to hold a hearing in De-

things, instead of acting . . . on a

cember in San Diego on the na-

County Board of Supervisors,

whim.” He also says it makes the

tional issue of “sweetheart deals,”

makes a point of noting the

CPUC’s decision reviewable by

focusing specifically on Mission

county opposed the merger even

the California Supreme Court on

Energy a move not likely to cool

before the city did, and indicates

a basis other than vaguely de-

the fires of merger opposition in

county staff has been directed to

fined “public interest.”

San Diego County.

formulate language for an advi-

Edison spokesman Lewis

As for the Restless Native Wild

Edison disagrees with the city’s Phelps says “there

Susan Golding, who chairs the

sory vote on the merger to be held

Phelps comments the law “pro-

Card in the merger, the San Diego

either next June or next Novem-

vides the CPUC with guidelines

City Council is holding its own

ber. Golding says too many is-

for making its decisions,” adding

hearings in October and Novem-

sues concerning the merger have

“we think the merger is a strong

ber to enable the utilities, merger

been discussed behind closed

case within those guidelines.”

opponents and the public at large

doors and need to be examined in

A legislative aide in Sacramento

to voice their opinions before the

public. The vote, she says, will

indicated the new law gives oppo-

Council formally votes to oppose

cause the debate to be more fo-

nents of the merger “a hook” on

the merger. City Attorney John

cused and give proponents of the

which to hang their objections

Witt issued an opinion in Septem-

merger a chance to convince the

and predicted it will provoke

ber indicating that the merger con-

voters of the benefits of the consol-

major consumer interest now that

stitutes a transfer of the city’s fran-

idation. For example, she says the

the Commission has to show de-

chise from SDG&E to a different

Board wants “absolute guaran-

monstrable benefits and find a

utility and therefore the city’s ap-

tees” there will not be adverse ef-

way to guarantee short-term and

proval is required before the

fects on air quality; “without

long-term rate benefits in both ser-

merger can be consummated re-

them, you have to vote ‘no.“’ she

vice territories. Jan Smutny-

gardless of what CPUC and FERC

says. The vote will enable the

Jones, general counsel for the In-

do.

community to have an effect on

dependent Energy Producers, says the law will have “a positive effect” in that it states the legislature’s concern about the potential anticompetitive effects of the merger. Other areas the new Rosenthal statute may propel into more intense debate are transmission access, already a big bone of contention with public utilities and independent power producers, and Edison’s transactions with its

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But the discooe y process hasn’t been so congenial.

The Electricity ]ournal

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the merger, because “there is no

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says this indicates the pressure of

signs of becoming a procedural trench war that could drag on in-

doubt an overwhelming vote in ei-

the merger is causing Edison to

ther direction would have an im-

make concessions it would not

terminably only to end up with

pact on the CPUC,” comments

make otherwise. Another source

strings the utility may not want to

Golding.

called it evidence of Edison’s abil-

live with. One Californian asked

ity to “pick off [potentially nega-

this hypothetical question: would

tive] issues quite expertly.”

Edison go forward if it had to

Hudson of the Coalition for Local Control says local opposition to the merger is on the rise

At the Washington end of the

offer transmission access as Pacifi-

even though SDG&E and Edison

merger, discovery in the FERC

Corp did in order to merge with

have spent $2 million in the past

case is grinding to a close. Also,

Utah Power & Light, if it had to

year on advertising to promote

as happened in California, there

divest itself of Mission Energy,

the merger. According to Hud-

are indications some legislators

and if it had to agree to a CPUC-

son, in November 1988, a San

want to oversee what the regula-

determined ratemaking formula

Diego Union poll found 57 percent

tors are up to, at least with respect

that would span a decade?

opposed to the merger and 30 per-

to environmental issues. One Cal-

Phelps scoffs at the idea there

cent for it, but a new poll this Sep-

ifornia Congressman, who sits on

might be a point at which Edison

tember revealed 59 percent

the committee that oversees

might turn back, saying ‘We

against and only 16 percent in

think we have a strong case.

favor. Phelps says the polling

We’re not going to stop.”

data “basically shows the level of

-Susan

L.

Whittixgton

opposition has remained constant” and he added that there

PUHCA “Tar Baby”

has been very little turnout whenever there has been a public

Kentucky Utilities Seeks “Rifle Shot” PUHCA Exemption

forum on the merger. “The average citizen doesn’t perceive it as a major issue,” he says. Meanwhile, Edison is moving

Kentucky Utilities, based in Lexing-

to reduce the opposition to its plans. In late September the company announced a settlement

FERC, has been talking about an

with Public Advocates Inc., a San

amendment to the Clean Air Act

Francisco-based coalition of mi-

that would require full NEPA

nority and women’s groups.

compliance for all large-scale

Under the agreement, Edison

mergers. Hudson says in Septem-

pledged to set goals for minority

ber a bipartisan group of Califor-

advancement within the com-

nia Congressmen, including

pany, for purchasing from minor-

Clean Air Act champion Henry

ity firms, for increased minority

Waxman, asked the EPA Adminis-

representation on the Board, and

trator to review the environmen-

donations to charitable organiza-

tal aspects of the merger.

tions. Public Advocates, which

As the legislative and regula-

had intervened in the merger

tory pots boil, the rumor persists

case, in return wrote to the CPUC

that Edison may be losing interest

endorsing the merger. Shames

in the merger, which shows some

November1989

ton, Ky., is already an exempt holding company under the definitions in the 1935 Public Utility Holding Company Act, by virtue of its ownership of Old Dominion, a small electric utility serving southwest Viia.

Old Dominion provided

only about one percent of Ku’s consolidated net income for 1988 and about seven percent of net revenues. KU now wants to follow in the footsteps of other utilities and form a corporate-level holding company that would allow the company to take advantage of diversification opportunities, such 13

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as setting up independent generat-

Environmental Action Founda-

motives. “Here’s a company that

ing companies or engaging in

tion, has real problems with the

says it wants to restructure to be

draft legislation that KU shared

more competitive, but which re-

it has no specific activities in

with him recently. Hempling

fused to wheel power to Ken-

mind, but is simply positioning it-

calls the KU legislation “a blank

tucky municipal utilities and so

self for the future.

check proposal” with implica-

denied them competitive opportu-

tions that go far beyond KU.

nities.” Hempling says he is

nonutility businesses.

KU insists

But KU’s lawyers believe they have a problem with PUHCA.

He cites information KU’s law-

working on amendments to the

yers provided indicating that five

bill which would “mitigate the

exemptions that might apply to

other utilities could be affected by

consumer risk it presents.”

Ku’s setting up a new corporate

McConnell’s bill. These are Cin-

holding company seems to apply.

cinnati Gas & Electric, Ohio Edi-

lation a “rifle shot” aimed solely

One exemption, under sec. 3(a)(l),

son, Minnesota Power & Light,

at the problem KU faces in form-

seems to require that subsidiaries

Northern States Power, and Phila-

ing a new corporate structure.

The problem is that neither of the

McConnell’s staff call their legis-

providing material income oper-

They are adamant about keeping

ate in a single state. Another, sec.

the legislation far away from the

3(a)(2), permits contiguous state

broader effort in the Senate En-

subsidiaries but seems to require

ergy Committee to rewrite

that the holding company be pre-

PUHCA.

dominantly a public utility. But

deavor,” said one McConnell

“That’s a lo-year en-

the law does not define what is

aide, “and we don’t want any

meant by “material” or “predomi-

parts of it. If this gets tied up with

nantly” “KU needs Congress to create

that tar baby, it will never move forward .”

exemption 3(a)(1.5),” said an aide

KU is taking its case to the Sen-

to Sen. Mitch McConnell (R-Ky.),

ate Banking Committee, where it

who has introduced a bill, S. 1551,

hopes the measure will prove non-

to do just that.

controversial.

But even if the util-

ity is successful in winning sup

‘This is not designed to open any particular floodgate,” said

delphia Electric. He says he is

port from the Senate, the measure

Bob Yolles, an attorney for Cleve-

particularly concerned because

will face tough going in the

land-based Jones Day Reavis &

four of the five other utilities are

House. Sources there indicate

rogue, which is working on the

combination gas and electric com-

that they are willing to take a look

issue for KU. “It is designed to

panies.

at what KU has in mind, but that

clarify a matter. This aids in the

Hempling says it is important

ability of the company to diver-

to look at the proposed legislation

sure deeply to be sure just what it

sify and to be more competitive in the future. There is no hidden

not just in the context of what it

might accomplish, both intention-

will do for KU today, but to see

ally and inadvertently.

agenda here. This is a limited at-

what it might do to consumers in

informally sign off on this sort of

tempt to address particular prob-

the future. “Congress drew the

thing,” said one House Energy

lems.”

PUHCA exemption provisions to

and Commerce Committee staffer. ‘This committee takes

skepticism among consumer

set objective limits,” he said. “KU wants to diversify to the extent it

watchdogs in Washington. Scott

decides.”

KU’s claim is eliciting some

Hempling, an attorney with the

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they are likely to probe the mea-

‘We can’t

PUHCA very seriously.” -Kennedy l? Maize

Hempling also questions KU’s

The Electricity Journal