Fortnightly Magazine - June 15 1995

Distributed Generation: Implications for Restructuring the Electric Power Industry

Until a few years ago, the concept of distributed or modular generation was largely academic. Recent developments in the electric power industry, however, have brought this once esoteric subject to the attention of utility executives as well as state and federal policymakers. Centralized, large-scale plans to use modular generators and demand-side management (DSM) to displace utility investments in bulk-power resources and high-voltage transmission projects is unrealistic.

Financial News

Regulation of the United Kingdom's 12 regional electricity distribution companies (RECs) has sought to promote efficiency through the use of price caps that are supposed to remain in place for five years without regulatory intervention. The benefits of cost reductions between reviews accrue to shareholders no matter how much earnings might rise. The idea was to provide more incentive than if earnings were subject to review whenever they exceed some specified level.

Productivity has increased enormously under this system.

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