Financial implications to utilities of third-party power purchases
There are benefits to utilities from purchasing power from independent power producers, and we expect that segment of the industry will continue to grow and be a major source of electric utility generation. However, there are also costs to the utilities associated with buying this power, some of which have not been fully recognized. In analyzing bids or negotiated purchases from third parties, utilities should adjust the purchase price to recognize all changes in the utilities' cost of capital resulting from the purchase. With respect to their own financial condition, the utilities should recognize a higher cost of equity or adjust their capital structures to allow for imputed debt. Failure to make these adjustments may result in purchasing power from a NUG when in fact utility construction would be cheaper. 1 fig., 2 tabs.
- OSTI ID:
- 5969854
- Journal Information:
- Electricity Journal; (USA), Vol. 3:9; ISSN 1040-6190
- Country of Publication:
- United States
- Language:
- English
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