Financial implications to utilities of third-party power purchases

Journal Article · Thu Nov 01 04:00:00 EST 1990 · Electricity Journal; (USA)

DOI:https://doi.org/10.1016/1040-6190(90)90184-B· OSTI ID:5969854

Perl, L J; Luftig, M D

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), Journal Name: Electricity Journal; (USA) Vol. 3:9; ISSN ELEJE; ISSN 1040-6190
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
290200 -- Energy Planning & Policy-- Economics & Sociology
296000* -- Energy Planning & Policy-- Electric Power
COMPETITION
ECONOMIC ANALYSIS
ECONOMICS
ELECTRIC POWER
ELECTRIC UTILITIES
MANAGEMENT
MARKETING RESEARCH
POWER
PUBLIC UTILITIES
SUPPLY AND DEMAND