Download Dr. Belovicz's Insights on Electric Utility Deregulation: An Overview of Re-regulation and more Study notes Economics in PDF only on Docsity!
Notice to studentsenrolledin ECON 4333
This documentwaspreparedby Dr. Bill Belovicz. Dr. Belovicz servedas
Chief Economistto the ArkansasPublic ServiceCommissionfor 9 years.He
servedasa visiting faculty memberat ArkansasStateUniversity in the
Spring semesterof 2001. Dr. Belovicz preparedthis documentto give
studentsenrolledin GovernmentRegulationof Businessan overviewof
deregulation(or what Dr. Belovicz terms"re-regulation")in the electric
utility industry.
Be advisedthat Dr. Belovicz participatedin a chat/virtualclassroomwith
studentson April 11,2001.You canreadthis chat at the Blackboardweb
(go the virtual classroomarchives).
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Bill Belovicz March 28, 2001
Electric - Regulation-To Deregulation(Reregulation)-To ?????
Characteristic Regulated Deregulated - Competitive Goals or Issue Service Allocatedby StateRegulatory Competefor customersfor energy Territory Body element,and other servicesdeclared competitive. Structureof Generation,transmission, Generation,transmission,and Industry distribution,billing, customer distributionseparated.Goal is to service,etc. verticallyintegrated makegeneration competitive. within jurisdiction. Investor Owned Transmissionstill regulatedby FERC, Utilities operatecontrol centers. but new forms of regionaltransmission Regionalcooperationaccomplished control developing. The California throughPowerPools. Also to some IndependentSystemOperator(ISO) is degreebetweenstatejurisdictions. one example. Distribution andother Transmissionregulatedby the servicesnot declaredcompetitivestill FederalEnergyRegulatory regulatedby state. Commission(FERC).
Rate RevenueRequirementmodelwhich RevenueRequirementmodelapplies Determination is an effort to simulatecompetitive to distribution andother pricing. The modelis Revenue noncompetitiveserviceexpenses.
Requirement= RateBase* Transmissioncomponentwould be
AllowableRate of Return+ dependenton form of transmission Expenses,developedfrom a coordination. Energybecomes weathernormalizedtest year. The competitive. !. overall revenue requirement is then. allocatedto the differentrate classes.Variancesfrom these tariffs aretreatedas special contractsor newly adjustedtariffs requiringstateregulatorybody approval. This modelappliesto the nonenergy portion of the bill. Energycostsare"passedthrough" to the enduser. Stateregulatory
body approvesinvestmentand
policieswhich affect energycosts.
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Opportunities Pricetaker with no options other Canexpectto receiveoffers pretty andrisks for than amountof energyconsumed. muchaswe now do for smallusers. Don't know the energycomponent telecommunications.The Ohio Public costuntil bill arrives. Stability Utility Commissionhasa web site for important. comparinggaspriceswhich they have deregulated.The site is calledApples -to-Apples. Consumerscanlock in the energyrate for one or two years, or choosea variablemarketprice. Severalcompanieshavedeveloped programswith which consumerscan receivea guaranteed total annual bill which is independentof weather fluctuation. Consumereducationis a major issuein this area.
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-~- , *j~$~"-'i";~ ... 'i~~ ...,' ," , California Requiredthat their investorowned utilities auctionoff their generation. Put a price capon generation(energy)
. which guaranteeda 10percent
~ reductionin residentialbills. Average ,7#)"~ C-t:~.^ .d^.
~.;:;r;~~~~; (l.WOrnIareSI entlal bill h d b a een $
~~':~ to $60. Has refuse to approve plant
c".,,~~~'~~~~f~J additionsfor ab?ut 10.~e.ars.Put cap ~~?jf:j;~'?;i-c cc."" on wholesalepncesutIlitIescould pay ~~i;t,~Ii~ ..."",'eO for importedenergywhich wasbelow. ~,,?;:'.,i market. In the last year demed a ~;~j7 request by PG&E (I think) to increase ~~;; their future purchasesof energy at a
"; fixedprice. Recentlyusedan
-""'-, ;,i.~""., EmergencyPowersAct to confiscate lil-",~ :::::~t:~~~~e
,ff~,^ :~~^ '7,,'J!~~~~,,':!,j;.,~ ~:,", ;~~j^ stateto Purchaseenergy at lessthan :;,:!~,:g~;; the currentmarket. Market power ~,~);~t:: ':1 issueshavebeenraised(andseveral ii7'", ~ inquiriesconductedandongoing) ~"'C'",,' ~:;"'r""' regardinggeneratorowners ,-' withholdingpower to manipulate prices. ISO establishesprice with the following rule: all transactions ~Cf"~ conductedduring an hour will clearat ;'~ the price of the last transactionfor that ,;:;"i-:f:;;{'~~~^ ,'Pc,:^ hour"^ Dunn.^ g t e astwee t eh i k h ~"'~-',..,,"'"",i" '~:f;:.';i!t;:i:) CaliforniaLegislatureandthe Utility ~~~"~-j ~;i:){:,;:~~,"",.it. Commis~ion- haverecommended c,;;1~~ residentialrate increasestotaling 65 percent. They arein the processof determininghow quickly to phase themin. I .. -" ,'c.. _Cy- .'
