Affiliate transactions and electric industry restructuring
All society benefits when society`s economic resources are used more efficiently. The lesson of recent history is that market forces of risk and reward result in the most efficient use of those resources. Affiliate transaction rules that skew or blunt the market forces of risk and reward are antithetical to the goals motivating restructuring in the first place. This article is about affiliate transaction rules and why restructuring of the electric industry makes them very important. The reason for their importance lies in the relationship between regulatory and corporate restructuring. The most visible process underway today in the electric industry is that of regulatory restructuring. In that process, regulators are redefining the industry`s natural monopoly functions more narrowlyy. Their intention is to limit regulation to those narrowly defined functions. The remaining functions they will then open to competition and market regulation. As a result of this process, what was once a single vertically integrated utility business will become a collection of regulated and unregulated businesses, each operating at a different level of the industry. It is only logical that these newley redefined businesses will require business cultures, compensation plans and capital structures that reflect the different rules under which they operate. Why restructure regulation at all unless restructuring will result in different - and more efficient - business behavior? For a host of reasons, it is very difficult to manage regulated and unregulated business as part of the same corporation. The most effective way to create separate business identities for these newly redefined businesses is to place them in separate corporations.
- OSTI ID:
- 381317
- Journal Information:
- Electricity Journal, Journal Name: Electricity Journal Journal Issue: 8 Vol. 8; ISSN ELEJE4; ISSN 1040-6190
- Country of Publication:
- United States
- Language:
- English
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Regulation of affiliated interests
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