Wheeling and stranded investment-is there a better way
Under current franchise law, retail wheeling must be addressed on a state-by-state basis, and (therefore) it will not sweep the electric power industry as deregulation has been visited upon the telecommunications, airline, natural gas and other industries. Nevertheless, many industry observers remain concerned that retail competition will create a significant stranded investment problem. That is, broadened competition among power generators for customers will result in the market value of some existing (previously market-protected) generation assets falling below book value. The significance of such asset revaluations, and the time required for adjustment, increases with the capital intensity of the industry; this is the reason for the heightened concern regarding the introduction of retail wheeling into the electric power industry. One policy direction that may be worthy of further debate and losses during the power market's transition to a more competitive equilibrium - i.e., until regulation-induced differentials between market and book values are mitigated. A two-part policy proposal is offered for consideration. First, the use of intra-pool transfer payments; second, if stranded investment continues to exist, a temporary uniform pool-wide wheeling surcharge.
- OSTI ID:
- 6910841
- Journal Information:
- Energy Daily; (United States), Journal Name: Energy Daily; (United States) Vol. 22:57; ISSN 0364-5274; ISSN ENDADJ
- Country of Publication:
- United States
- Language:
- English
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