Disruptive technologies and resource shifts are changing the utility business model. Market factors are driving companies toward four possible paths.

A century of electrification shows clearly that more electricity—and cheaper electricity—enhances public health, raises living standards and also improves the environment. Conversely, higher prices harm businesses and families, with a disproportionate impact on low-income households. Public welfare goals are best served by public policies that make electricity more accessible and affordable to the masses—not less.

New baseload generation is needed in many areas of the United States, but financing new plants will be particularly challenging in restructured states where generation facilities are no longer included in rate base and therefore not financed through the traditional rate-of-return paradigm. A market hybrid approach—in which new baseload plants would be partially owned and financed by the regulated distribution company with the other portion owned and financed by the unregulated generation company—would combine the advantages of lower cost capital and regulatory oversight associated with traditional rate of return regulation, with the cost control and efficiency associated with competitive markets.

The Supreme Court’s recent decision empowering the Environmental Protection Agency to regulate carbon dioxide shifted momentum toward a mandatory program to cap greenhouse-gas emissions. Eventually, there will be huge implications for power generation.

Off Peak

November 1, 2001

Nightmare Scenario

 

Professor chokes on green group emissions.