Energy distribution monopolies: A vision for the next century

Journal Article · Sat Aug 01 04:00:00 EDT 1998 · Electricity Journal

DOI:https://doi.org/10.1016/S1040-6190(98)00066-9· OSTI ID:675526

Cavanagh, R; Sonstelie, R

As the electric industry restructures, most public and academic attention has focused on its competitive business lines. Left in relative obscurity are activities that remain subject to monopoly regulation, which generally have been lumped together under the disdainful heading of the wires business. To some, this business is an unexciting residual detail of restructuring; others even claim it soon will be obsolete. Count us as enthusiasts about the robustness and the social significance of regulated distribution monopolies. This paper begins by sketching a positive vision of that business as the authors expect it to evolve, centered on the following elements: (1)combined electric, gas, and water operations under either private or public ownership; (2)full separation from the competitive generation assets of today`s integrated utilities; (3)the obligation to connect all customers to the grid, but not to cross-subsidize connection costs; (4) incentives for the business to invest in the new distribution infrastructure needed to serve an expanding economy and so-called distributed generation; (5) profit opportunities tied to success in meeting service quality goals and in minimizing the life-cycle costs of reliable distribution services; and (6) competitively neutral public-goods charges on distribution service, which underwrite long-term investments in water and energy efficiency and in renewable energy resources, as well as targeted electricity, gas, and water services for low-income households. Finally, the authors address claims that a distribution focus is inconsistent with robust earnings opportunities for investor-owned utilities. The authors close with a review of strategies for realizing this vision of a new kind of distribution monopoly. Urgently needed are incentives for a simultaneous process of separation and convergence: competitive generation assets will move to alternative ownership even as gas, electric, and water distribution systems come together and expand their average geographic scope. New systems of price regulation will be needed to ensure the alignment of utility and societal interests. Public-purpose investments must be shifted to competitively neutral charges and made subject to performance-based incentives.

• OSTI ID: 675526
• Journal Information: Electricity Journal, Journal Name: Electricity Journal Journal Issue: 7 Vol. 11; ISSN ELEJE4; ISSN 1040-6190
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
COMPETITION
ELECTRIC UTILITIES
GAS UTILITIES
MONOPOLIES
PRICES
SOCIO-ECONOMIC FACTORS
WATER UTILITIES