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091525 1 (1978-02-28)

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         UNITED STATES GENERAL ACCOUNTING OFFICE
                 WASHINGTON, D.C. 20548

                                       FOR RELEASE ON DELIVERY
                                       EXPECTED AT 9:00 A.M. EST
                                       TUESDAY, FEBRUARY 28, 1978

                      STATEMENT OF
            J. DEXTER PEACH, DEPUTY DIRECTOR
              ENERGY AND MINERALS DIVISION
                       BEFORE THE                      LM091525
          SUBCOMMITTEES ON MINORITY ENTERPRISES
          AND GENERAL OVERSIGHT; AND ENERGY,
            ENVIRONMENT, SAFETY, AND RESEARCH
                         OF THE
               COMMITTEE ON SMALL BUSINESS
         UNITED STATES HOUSE OF REPRESENTATIVES

Mr. Chairman:

     We appreciate your invitation to discuss some of the

issues related to our review of energy costs and their potential

impact on small business relocations in the States of New York,

Michigan, and Pennsylvania. You asked that we address issues

related to electric utility fuel procurement practices and

the structure of electric rates and determine how they could

affect energy costs.

FUEL PROCUREMENT PRACTICES

     The electric utilities in the three states covered by

our review relied almost entirely on coal and oil to fuel

their generators. Fuel supplies were obtained from a variety

of sources at varying prices. None of the three State Public

Utility Commissions require that utilities use advertised

solicitations with sealed bids for fuel purchases, although

a few utilities do use this procurement method. Most of the

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