All versions of the "revolution" in the electric power industry seem to turn on the prospect of competition in generation. This indeed is the vision of things to come.1 The generation in question is either partly utility owned and partly independent or (em in the best of all possible worlds (em all independent, as a result of disintegrating the vertical utility monopoly.2
The startling disparities between the cost of delivered kilowatt-hours in the various utility service territories supply the driving force behind the demand for competitive opportunity and access. Many observers now claim that the "market" price of electricity lies somewhere in the 4 cents per kilowatt-hour (›/Kwh) range, while, in certain service territories, retail rates may range upwards of 10 to 12 cents per kilowatt-hour.3 In general, we are to believe that there is "efficient" generation, which is usually ascribed to more competent management, and "inefficient" generation, which is normally attributed to a correspondingly backward management.4 No wonder there is a demand for competition if good management and bad management can be so sharply distinguished at the bottom line.
The literature on competition, however, has mostly failed to address the specifics of efficiencies in electric generation or the ways in which electric generation will respond to a competitive environment.
Heat Rates, Efficiency, and Vulnerability