Who pays for sunk costs

Book · Fri Jan 01 04:00:00 EST 1988

OSTI ID:7019925

Wilson, J W

The issue of who pays for certain competitively-induced excess capacity costs has been resolved in a number of rate cases in the natural-gas and electric-utility industries. Many FERC-regulated pipelines have sustained large sales losses because they have attempted to recover uncompetitive cost levels in the face of an expanding array of competitive alternatives to pipeline sales, such as transportation, conservation, and alternative fuels. In several cases in recent years, the FERC has assigned some of the cost of unused pipeline capacity to stockholders. At the state commission level, electric and natural gas cases dealing with incentive or cogeneration deferral industrial rate discounts have been the most frequent venue for determining rate payer-stockholder allocations of completitively-induced uneconomic sunk costs. In most of these cases, the utility's attempts to recover excess sunk costs have made competitive alternatives more attractive to industrial customers, leading to actual or threatened loss of utility sales. Utilities and regulators have responded by attempting to preserve or increase utility sales by allowing rate discounts for price-elastic industrial customers who maintain or increase loads. 101 references.

• OSTI ID: 7019925
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
290200 -- Energy Planning & Policy-- Economics & Sociology
293000* -- Energy Planning & Policy-- Policy
Legislation
& Regulation
296000 -- Energy Planning & Policy-- Electric Power
ALLOCATIONS
CAPACITY
COMPETITION
COST
ELECTRIC UTILITIES
EXCESS COSTS
GAS UTILITIES
PUBLIC UTILITIES
RATE STRUCTURE
REGULATIONS
STATE GOVERNMENT