Business & Money

The collapse of wholesale markets has utilities once again making the purchasing decisions, and taking all the risks.

If a common theme is emerging from the various policy directions across the country, it seems to be that responsibility for supply resources is moving away from open markets and back into the hands of load-serving utilities.

This is partly a survival response from an industry that has been in crisis. In the absence of a liquid wholesale power market, state regulators and utilities are reverting to resource planning systems that hearken back to the early 1990s. This dated practice-known as integrated resource planning (IRP) and competitive bidding processes-is being welcomed by regulators and even beleaguered merchant players desperate for reliable revenue streams.

"IRP is tried and true. It's something that regulators are familiar with," says George Gross, a professor at the University of Illinois at Urbana-Champaign, and formerly a manager of electric resource planning at Pacific Gas and Electric Co. "For lack of anything better, IRP is a possibility at this point. But I am not convinced this will be effective policy."

The industry has changed, Gross says, and even integrated utilities are loath to return to the old environment. At the same time, however, a return to IRP in some form might help the industry get off the dime and move into its next stage of evolution, some analysts say.