What's a Utility?
Never before have...
on retail rates will be a major political and regulatory issue.
U.S. utilities own more than 655 GW of generation assets. The net book value of these assets in 1998 will be $227 billion, or about $346/kW. RDI estimates that the market value of these assets is only $187 billion. Nearly half of all utility generation investments are accounted for by nuclear generation. The market value of these plants is only one-fifth of the remaining undepreciated investment in the plants. For all other classifications of generation, however, the estimated market value of the assets is higher than the book value, resulting in the stranded benefits.
The political interests of consumers and utilities will vary widely in different states. In states with high stranded costs, utilities will fight to protect their shareholders while consumers and new market entrants will fight for immediate benefits from deregulation. In states that have negative stranded costs, utilities will fight for immediate deregulation while consumers will fight to ensure that their rates do not increase as a result of deregulation. Caught in the middle will be states that have utilities with both substantial above-market costs and substantial below-market costs.
Christopher Seiple is principal at Resource Data International Inc., an energy industry consulting and information management firm specializing in market and competitor analysis.
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