Economics of electric utility rate phase-in. [For new, expensive power plants]
Since 1980, a number of large, expensive generating units have been built by electric utilities. These plants represent a large portion of the utility's rate base when they enter service. As a consequence, rates paid by consumers can increase dramatically when the plant enters the rate base. A number of systems have been proposed to phase in the rate increases in order to mitigate the impacts of entering a new plant in the rate base. All phase-in schemes must address the interests of three parties: (1) utility companies, (2) electricity consumers, and (3) utility company regulators. The most commonly discussed phase-in methods are (1) Negative CWIP, (2) Altered Depreciation, (3) Post-operational Phase-In, (4) Economic Depreciation, and (5) Levelized Payments. Utilities in theory, are indifferent as to which method to use as long as there is assurance that they will be adequately paid. Consumers prefer methods that postpone rate increases as long as possible. Regulators are indifferent as to which method is used as long as both utility companies and consumers are satisfied. No single phase-in system is clearly preferable under all circumstances. The best phase-in method must be determined on a case-by-case basis.
- Research Organization:
- Los Alamos National Lab., NM (USA)
- DOE Contract Number:
- W-7405-ENG-36
- OSTI ID:
- 6352706
- Report Number(s):
- LA-10515-MS; ON: DE86001231
- Resource Relation:
- Other Information: Portions of this document are illegible in microfiche products. Original copy available until stock is exhausted
- Country of Publication:
- United States
- Language:
- English
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