Empirical analysis of physical excess generating capacity in the US investor-owned electric utility industry
This study addresses three fundamental questions. (1) Do regulators impose penalties upon utilities with excess capacity (2) Is excess capacity persistent in nature (3) What factors are important determinants of excess capacity The ordinary least-squares results indicate that there is an inverse relationship between excess capacity and profits. Regulators, in an attempt to minimize the escalating costs of producing electricity, impose penalties upon utilities with excess capacity. Spearman rank correlation coefficients are used to test for the persistence of excess capacity over the period 1979 to 1986. Results indicate that for most electric utilities excess capacity is not a persistent problem. Regulatory and/or market forces insure that high levels of excess capacity are a short-term, not a long-term phenomenon. Use of a uniform rule of thumb, to measure excess capacity, is often faulted because such thresholds fail to consider technical differences that exist between utilities. Uniform reserve-margin thresholds can be used to measure excess capacity. However, results indicate that customer preferences for an increased or decreased level of reliability are significant determinants of excess capacity.
- Research Organization:
- Georgia Univ., Athens, GA (USA)
- OSTI ID:
- 5429635
- Resource Relation:
- Other Information: Thesis (Ph. D.)
- Country of Publication:
- United States
- Language:
- English
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