Stranded investment subcharges: Inequitable and inefficient
- California State Univ., Fullerton, CA (United States)
Retail competition will render a substantial fraction of existing electric utility plant worthless. Some estimates are so large that the question of compensation for these so-called {open_quotes}stranded investments{close_quotes} overshadows debate on the value of retail competition. Advocates of compensation frequently appeal to a {open_quotes}regulatory compact{close_quotes}. They claim that this compact justifies compensation for utilities on grounds of fairness. The case for fairness, however, is badly flawed. Moreover, compensation may adversely affect the efficiency of markets in which competition is emerging. Compensation forces power users to forego productive opportunities to make their own transactions while they finish paying for plants that utilities never should have built. Save for special cases, it is both fair and efficient that utilities take the losses on those plants.
- OSTI ID:
- 96073
- Journal Information:
- Fortnightly, Journal Name: Fortnightly Journal Issue: 10 Vol. 133; ISSN FRTNE8
- Country of Publication:
- United States
- Language:
- English
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