(November 2009)Regulators are in the unenviable position of determining an allowance for ROE that’s fair to consumers and investors in a volatile economy. The cases that stand out this year...
Electricity in Europe And North America: The Grand Experiment
Has restructuring succeeded on either continent?
feature of electric industry development during the past 15 years in the United States has been the dramatic improvement in nuclear power plant availability and capacity factors. This improvement has been coincident with the emergence of wholesale and retail competition as well as with considerable merger activity creating much larger nuclear operation as well as “de-rate basing” of nuclear plants. Yet it cannot be conclusively said that the improvement has been the result of competition.
7. The authors made the argument a decade ago that the application of technology and sound economics could enable the competitive model to advance the cause of extending service and lowering costs for low-income customers. See O’Connor, Philip R.; Jacobson, Erik B., and Barnich, Terrence L. “ Regulation or Technology? Low-Income Customers and the Transition to Competition ,” Public Utilities Fortnightly , Nov. 15, 1995.
8. Some competition advocates have maintained that whatever the original objective, traditional regulation eventually was discouraging technological innovation because sunk costs were destiny in cost-based regimes. See, e.g., Alfred E. Kahn, Letting Go: Deregulating the Process of Deregulation , Institute of Public Utilities, Michigan State University Press, 1998; RobertW. Crandall, Competition and Chaos , Brookings Institution Press, 2005.
9. The Illinois Institute of Technology in Chicago and the Galvin family that built communications powerhouse Motorola Inc., have embarked on a joint project to leverage wireless and other communications technology to create the “perfect” electrical system with far greater reliability and customer control. “Motorola’s First Family Now Focused on Redesigning Electrical Distribution,” Daily Herald (Arlington Heights, Ill.), Aug. 21, 2006.
10. Clark W. Gellings and Kurt E. Yeager, “Transforming the Electric Infrastructure,” Physics Today , December 2004, at p. 13:“[Information technologies] have transformed every major industry in the Western world except the electric power industry. … What we do need is to use advanced technology to modernize and enhance the use of the existing asset base.” Some utilities in both the United States and Europe have been going down the road to create intelligent electricity networks to, in the words of Spain’s Endesa, “achieve maximum quality and efficiency in distribution, predict demand, anticipate instabilities, and increase the flexibility of the electricity distribution operation by incorporating sensors, and real-time communications and systems management.” Endesa press release, June 28, 2006.