Outsourcing of generating assets as a competitive strategy for large electric customers
The US electric power industry is at a transitional stage on the way to full competition at the retail level. A fundamental difference between wholesale and retail competition is that, with the latter, the end user will have a choice of suppliers. Large electric customers, such as industrial manufacturers, have traditionally had only two choices: to purchase from the local franchise utility or to self-generate. With retail competition, however, these same customers will have not only have many choices of suppliers to compare against the self-generation option, but also will have a new alternative to consider - that of outsourcing their generating assets as a means of retaining effective control, but not necessarily ownership, of their electric supply. Outsourcing of generation assets means turning over complete or partial ownership of these assets to a third party, who then sells the electricity back to the customer at retail. This approach can be advantageous to a customer who wants to achieve one or more of the following benefits that are generally not available in the traditional ``make or buy'' paradigm: monetize (receive cash for) assets to pay down debt or redeploy into its core business; reduce operating and overhead costs; meet increasing power demand without making a significant capital expenditure; retain a significant degree of control over the operation of the assets, rather than turning its source of supply to a utility, independent generator, or power marketer; and move the assets off-balance sheet and off-credit as a means of improving its corporate financial position. Outsourcing of industrial generation, including most or all of the above benefits has already occurred successfully in a handful of cases, such as the James River and Stone Container mills discussed in this paper.
- OSTI ID:
- 20050580
- Report Number(s):
- CONF-971214-; TRN: US0002475
- Resource Relation:
- Conference: 10th International Conference and Exhibition for the Power Generating Industries, Dallas, TX (US), 12/09/1997--12/11/1997; Other Information: PBD: [1998]; Related Information: In: Power-Gen '97 International, [2000] pages.
- Country of Publication:
- United States
- Language:
- English
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