In the electric power industry, the urge to merge has gained a new lease on life. These combinations are witness to the powerful forces of consolidation let loose when deregulation makes consolidation a preferred tactic in an uncertain world. But to what extent will government policy encourage or resist this trend? What exactly is the regulatory environment that nurtures combinations or, for that matter, supports fragmentation? As we shall see, there are many cross-currents.
FERC risks going overboard in easing penalties for generation imbalances.
Bruce W. Radford
What good is a penalty that does nothing to deter the crime? For wind turbines, generation imbalances are caused primarily by variations in weather. Even if these imbalances are indeed a bad thing, no $100 penalty will make them go away.
Why current estimation models set allowed ROE too low.
A. Lawrence Kolbe, Michael J. Vilbert and Bente Villadsen
A material capital structure mismatch, which occurs frequently, can lead to material misestimates of the appropriate allowed return on equity, perhaps on the order of 2 percentage points. That is, a 9 percent estimate of the cost of equity can imply an allowed rate of return on equity of 11 percent.
As the balloting process for new cyber-security standards from the North American Electric Reliability Council (NERC) drew to a close, the industry group was gearing up for the difficult tasks ahead: ensuring rapid implementation of the new standards among NERC's members.
FERC must align the immediate self-interest of profit-maximizing entities with its own view of what is in the public interest.
James J. Hoecker & Stephen Angle
Two obstacles must be overcome to achieve true competitive markets: reversal of the long-term underinvestment in transmission, and greater clarity in the legal and regulatory environments. How can the industry make the most of a somewhat defensive regulatory posture?
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