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Perspective

Two Cato analysts suggest a return to the past-vertical integration, but now with no state regulators.
Fortnightly Magazine - February 2004
  1. those for coal plants (Peirce, p. 216). Not all nuclear plants are more expensive than coal-fired plants. Peirce reports (pp. 217-218) that the least expensive nuclear plants have total costs lower than the cheapest coal plants but that at every other point in their respective distributions, nuclear plants are more expensive.
  2. In 1996, if implemented, full utilization of conventional steam-electric "baseload" facilities off peak would have resulted in a 25.5 percent increase in power production and a similar percentage decrease in price. See Michael T. Maloney, Robert E. McCormick, and Raymond D. Sauer, "Customer Choice, Consumer Value: An Analysis of Retail Competition in America's Electric Industry," Washington, D. C.: Citizens For A Sound Economy Foundation, 1996, p. 32.
  3. For a more thorough discussion of the crisis, see Jerry Taylor and Peter Van Doren, "California's Electricity Crisis: What's Going On, Who's to Blame, and What to Do," Policy Analysis 406, Cato Institute, July 3, 2001.
  4. Tim Brennan, "Mismeasuring Electricity Market Power," 26 (issue 1, 2003): 60-65.
  5. Douglas Hale, Thomas Overbye, and Thomas Leckey, "Competition Requires Transmission Capacity: The Case of the U.S. Northeast," 23 (issue 2, 2000): 40-45. The authors use optimal power flow analysis to demonstrate that small additions to the grid in Northeast would lower prices for consumers across several states.
  6. Robert J. Michaels, "Can Nonprofit Transmission Be Independent?" 23 (issue 3, 2000): 61-66.
  7. Hung-po Chao and Hillard Huntington, editors, (Boston, Mass.: Kluwer Academic Publishers, 1998), Chapter 7.
  8. Chapter 1 in Chao and Huntington, p. 24.
  9. Gary D. Libecap and James L. Smith, "Regulatory Remedies to the Common Pool: The Limits to Oil Field Unitization," 22 (issue 1, 2001): 1-26.
  10. U.S. Department of Energy, Energy Information Administration, Electric Power Annual 2002, figure 7.4, p. 43.
  11. Shimon Awerbuch, Leonard Hyman, and Andrew Vesey, , (Vienna, Virginia: Public Utilities Reports Inc., 1999).
  12. See, for instance, George Stigler & Claire Friedland, "What Can Regulators Regulate?" 5, October 1962, pp. 1-16; Harold Demsetz, "Why Regulate Utilities?" 11, 1968, pp. 55-65; Richard Posner, "Natural Monopoly & Its Regulation," , February 1969, pp. 548-643; Thomas Gale Moore, "The Effectiveness of Regulation of Electric Utility Prices," 36:4, April 1970, pp. 365-375; Michael Crew & Paul Kleindorfer, "Governance Costs of Rate-of-Return Regulation," (ZgS) 141, 1985, pp. 104-123; and Michael Denning & Walter Mead, "New Evidence on Benefits and Costs of Public Utility Rate Regulation," , James Plummer & Susan Troppmann, eds. (Palo Alto: QED Research, Inc., 1990), pp. 21-40.
  13. Lori A. Burkhart, "Blackouts? Never Again (But . . . .)," (Oct. 1, 2003) p. 30.

 

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"Transmission investment decisions do not immediately strike me as being ideally suited to relying entirely on the invisible hand. Transmission investments are lumpy, characterized by economies of scale and can have physical impacts throughout the network. The combination of imperfectly defined property rights, economies of scale and long-lived sunk costs for transmission investments, and imperfect competition in the supply of generating services can lead to either