Discussion paper on wholesale ratemaking considerations for sulfur dioxide emissions allowance trading
The acid rain provisions of the Clean Air Act Amendments of 1990 (CAAA) created an allowance trading program for SO{sub 2} emissions from electric utility power plants. Theoretically, the trading program will provide utilities the flexibility to control their SO{sub 2} emissions at minimum aggregate societal costs. The trading program is a significant change from command-and-control environmental policies. A continuing concern is whether the market-oriented trading program is compatible with the pervasive rate regulation of the electric utility industry. Economists accept traditional rate regulation policies tend to provide incentives for utilities to minimize risks, rather than costs. To the extent that this is true, the allowance trading experiment is not likely to be successful. A number of commenters have described proposals for alternative regulatory policies to provide utilities with appropriate incentives for cost-minimization. These proposals focus on utility incentives at a {open_quotes}macro{close_quotes} level This paper has a {open_quotes}micro{close_quotes} level focus. It examines options for ratemaking that may also influence utility incentives for cost-minimization to provide a structured discussion of the different types of transactions that involve allowances. Emphasis is on the implications of allowance trading on ratemaking for wholesale power sales. Some of the same considerations that apply to wholesale ratemaking may also apply to retail ratemaking. Four generic types of allowance transactions are examined: Type 1: Unbundled Allowance Sales, Type 2: Wholesale Power Sales, Type 3: Pooling Arrangements, and Type 4: Holding Company Transactions. Each of these four generic allowance transactions is assessed along two 3 dimensions: jurisdictional issues and wholesale ratemaking considerations.
- Research Organization:
- National Regulatory Research Inst., Columbus, OH (United States)
- OSTI ID:
- 75499
- Report Number(s):
- NRRI-93-8; CONF-9205161-Exc.; CONF-9204302-Exc.; CONF-930334-Exc.; ON: DE95008741; TRN: 95:004730-0006
- Resource Relation:
- Conference: Regulatory policy issues and the clean air workshop, St. Louis, MO (United States); Charlotte, NC (United States); Oxford (United Kingdom), 7-8 May 1992; Apr 1992; 29-31 Mar 1993; Other Information: PBD: Jul 1993; Related Information: Is Part Of Regulatory policy issues and the Clean Air Act: Issues and papers from the state implementation workshops; Rose, K. [ed.]; Burns, R.E.; PB: 217 p.
- Country of Publication:
- United States
- Language:
- English
Similar Records
A need to act: The FERC, the state commissions, and the Clean Air Act
Regional perspectives on restructuring and deregulation in the Western States