Who should pay transition costs?
- Oak Ridge National Lab., TN (United States)
Once regulators decide how much of its transition costs a utility should be allowed to recover, regulators need to implement workable cost-recovery mechanisms. Such mechanisms should encourage competition in the generation sector and should neither unduly favor nor hamper the interests of utilities, independent power producers or customers. Transition costs are enormously contentious for two reasons. First, a great deal of money - roughly $150 billion - is potentially at stake. Second, the decisions on how these costs should be allocated - among electric-utility shareholders, retail and wholesale customers, independent power producers and other wholesale electricity providers, and state and federal taxpayers - depend much more on policy judgments than on analysis. This article, based on a comprehensive analysis of transition-cost issues, summarizes the primary arguments in this debate, and reviews recent regulatory and legislative decisions determining which parties are responsible for transition costs. Because some level of cost recovery is likely to be allowed in most jurisdictions, the authors also discuss the design of cost-recovery mechanisms aimed at promoting competitive electricity markets.
- OSTI ID:
- 543178
- Journal Information:
- Electricity Journal, Journal Name: Electricity Journal Journal Issue: 5 Vol. 10; ISSN ELEJE4; ISSN 1040-6190
- Country of Publication:
- United States
- Language:
- English
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