As an offshoot of the recent state deregulation, two Michigan utilities, Consumers Energy, the principal subsidiary of CMS Energy Corp., and Detroit Edison Co. are set to file with the Michigan Public Service Commission petitions for securitization.

Consumers Energy is asking for $700 million while Detroit Edison is requesting $2 billion. The amounts are to be decided by the Commission, which is given by law a 90-day time frame to come up with a financing order. Both securitizations are anticipated for the end of the year.

The law provides for a 5% residential rate cut which is expected to be funded by savings on the anticipated securitizations. CMS is expecting a $48 million cut in its yearly revenue, while Detroit Edison is expecting a $65 million rate cut.

The legislation requires that additional securitization savings should cut the costs for a combination of industrial and commercial customers. Additionally, left-over savings will be passed on to a low income and energy efficiency fund, which is provided for in the act.

However, despite the utilities' success in Michigan, other states are not so fortunate.

Three companies in New Jersey are still waiting to securitize.

Public Service Electric Gas Co. (PEG) hit a roadblock to its plans to securitize when New Jersey Business Users appealed a lower-court's ruling affirming the state regulator's securitization orders for PEG.

The final papers for the appeal will be filed within a week or two, and it will take the state Supreme Court about a month to decide on whether it will hear the case or not. If the SC decides not to hear the case, PEG will securitize within weeks.

Another New Jersey company, GPU Energy, is still awaiting final orders from the Board of Public Utilities (BPU) to securitize $587 million. GPU has selected Goldman Sachs to head the deal.

Atlantic City Electric, a division of Conectiv, has not yet filed for a securitization with the BPU and is awaiting for a verification from the state regulators as to how much it could securitize. The company is looking to do a $500 million securitization.

In Vermont, though there are 22 electric companies existing in the state, only Central Vermont Public Service Corp. and Green Mountain Power Corp. have filed a petition, which was done in November, with the state regulators to voluntarily open their doors to competition.

Along with working to bring competition to Vermont in 2001 and 2002, both companies are also seeking to securitize through the regulatory process. To date, there has been no legislation in the state to bring about restructuring as well as to allow securitization.

In a related development, Prudential Securities was recently appointed as the independent investment banker by the Texas utility commission to approve the structuring, marketing and pricing of the bonds in the state's stranded costs securitizations slated for the fourth quarter. Prudential has to certify to the commission that the lowest cost of the bonds have been achieved. This move may serve as a precedent for other states considering securitization.

Meanwhile, Northeast Utilities, through its subsidiaries in Massachusetts, Connecticut and New Hampshire, is likely to be a major issuer in the stranded cost sector going forward (see Northeast story, ASR 5/29/00).

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