The "duty to connect" demands definition - such as the optimal investment in local wires, and who should pay for it.
As the electric utility industry continues its slow but inexorable transformation into a more "competitive" industry, there has been a notable absence of discussion concerning continued regulation of local distribution utilities, or discos.
This glaring omission is problematic, as the overall success of restructuring efforts will depend to a critical degree on maintaining a safe and reliable "obligation to connect." If that obligation is not met, or if the costs of meeting it increase, the benefits of competition will not be realized.
And the matter is even more complicated. A fundamental regulatory conflict may exist between regulated discos and unregulated retail energy suppliers. This conflict may well require action from utility regulators.
The Conflict That Arises
Suppose a large, electricity-intensive industrial customer wishes to expand its manufacturing operations in a particular disco's service territory.fn1 If the expansion takes place, it will mean additional secondary growth in electricity demand as new suppliers, businesses and households locate in the area. If not, local area demand will increase very slowly.