Deregulation 1993: Be careful what you wish for, you might get it
This article tries to assess the response at the electric industry to deregulation. The industry most probably will consolidate to reduce operating costs and expand access to other transmission grids. In addition, the cheapest power likely will be [open quotes]dedicated[close quotes] to retail customers (namely, those under a franchise obligation), and [open quotes]residual[close quotes] generating capacity will be placed in the wholesale market. Surplus capacity (the most expensive capacity) could be dedicated to the wholesale sector, allowing market forces to decide the future price of incremental generation. The outcome will be influenced heavily by corporate restructuring initiatives, regulatory willingness or opposition, legal victories by large-scale users, and transmission access policies at the state and federal levels. Changes is definitely underway, but [open quotes]what[close quotes] the industry will look like is unclear. The financial consequences of this change are more easily identified. Evidently, internal pricing pressures and the breakdown of regulatory pricing structures (a trend that has been underway for nearly a decade) have combined to produce a more risky industry. To compensate investors, capital markets could demand increases returns and different corporate structures. Many of the financial benefits currently enjoyed by utilities, such as lower earnings/coverage tests and greater debt leverage than other [open quotes]industrial[close quotes] corporations, may have to change. Stepping out from under the protection of the regulatory umbrella will carry certain costs.
- OSTI ID:
- 6477417
- Journal Information:
- Public Utilities Fortnightly; (United States), Journal Name: Public Utilities Fortnightly; (United States) Vol. 131:9; ISSN PUFNAV; ISSN 0033-3808
- Country of Publication:
- United States
- Language:
- English
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Related Subjects
296000* -- Energy Planning & Policy-- Electric Power
CAPITALIZED COST
COST
DEREGULATION
ECONOMIC ANALYSIS
ECONOMICS
ELECTRIC UTILITIES
FINANCIAL INCENTIVES
FORECASTING
OPERATING COST
PRICES
PRICING REGULATIONS
PUBLIC UTILITIES
REGULATIONS
RETAIL PRICES
WHOLESALE PRICES