The electric power industry lies in the midst of major change, including a shift to market-based wholesale prices. Market players and regulators will recognize that competition requires a shift in thinking on key issues such as resource planning before the market is developed enough to provide adequate price information.
Who will pay the costs incurred by regulated utility companies as they shift to competitive markets under plans engineered at the federal and state levels? This question is part of the debate over electric industry restructuring, but any payments lie in the future. For ratepayers in the gas market, however, the time has come. So far, state regulators have interpreted the law as prohibiting any sharing of gas market "transition" costs between shareholders and ratepayers.
In his article, "The Flawed Case for Stranded Cost Recovery" (Feb. 1, 1995), Charles Studness made many good points. Yet he omitted to mention one critical factor that influenced several utilities in the late 1970s to go ahead with new coal and nuclear capacity: the Carter Administration's 1978 Fuel Use Act, mandating that utilities cease burning natural gas by 1989.
For many companies operating in the south central United States, this requirement meant conversion or replacement of most existing capacity.
California's 1993 qualifying facility (QF) auction dramatically illustrates problems that can be encountered in structuring auctions for electric utility solicitations of supply-side resources from qualifying cogeneration and small power production facilities.
In the 1993 California QF auction, three California utilities were to select QFs that would be awarded long-term purchased-power contr
Who will pay the costs incurred by regulated utility companies as they shift to competitive markets under plans engineered at the federal and state levels? This question is part of the debate over electric industry restructuring, but any payments lie in the future. For ratepayers in the gas market, however, the time has come. So far, state regulators have interpreted the law as prohibiting any sharing of gas market "transition" costs between shareholders and ratepayers.
We stand on the threshold of a new era in the electric services industry. I deliberately avoid the term "electric utility industry," because the future is not limited to the vertically integrated monopoly utility. Many utilities may already perceive the first cracks in their armor: nonutility generators (NUGs), self-generators, and energy service companies.
Competition is not in the industry's future; it is here now. Further, competition and market forces are not going to magically disappear.
An article by Renz Jennings et al. (Jan. 15, 1995), "DSM Programs Must Target Consumers, Not Just Technology," unintentionally implies that information from the national Database on Energy Efficiency Programs (DEEP) project "is not always available to the program analysts involved in designing, implementing, and evaluating programs conducted by their own organization." Nothing could be further from the truth.
The advent of a competitive electric utility industry will fundamentally change the role of fuels in the industry. The fact that fuel is the dominant variable cost in power generation will reverse the relationship between the fuels and power production functions in many companies. Only plants that are competitive will operate; only operating plants will produce revenues.
Usage of utility services is rarely uniform across the day, month, or year. Dramatic increases in loads often appear at particular times of the day or in particular seasons of the year. Telephone utilities may choose not to meet extreme peak demands, but electric, natural gas, sewer, and water utilities usually do not enjoy that option. Failure to meet peak demands can lead to catastrophic consequences for both the customer and the utility, and can draw the attention of regulators.
The Federal Energy Regulatory Commission (FERC) has opened a paper hearing on electric loop flow issues arising from the unscheduled flow mitigation plan filed by the Western Systems Coordinating Council (WSCC) (Docket No. ER95-215-000). WSCC members have endured loop flow problems in their region for over 20 years. Expanding on previous ideas, the plan includes the coordinated operation of "controllable devices," such as phase-shifting transformers, that can reduce the level of unscheduled flow by altering power flows on parallel alternating current transfer paths.