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Fortnightly Magazine - May 2010

People

(May 2010) Duke Energy named Catherine Heigel to the new position of president of its South Carolina service region. Exelon promoted David C. Brown to senior v.p., federal government affairs and public policy, leading the company’s Washington, D.C., office. CMS Energy promoted John G. Russell to CMS Energy and Consumers Energy president and CEO from president and COO of Consumers Energy. And others.

Autopilot Error

Why similar U.S and Canadian risk profiles yield varied rate-making results.

James M. Coyne and John Trogonoski

Cost of capital is often a contentious issue in utility ratemaking. This is due, in part, to the inexact nature of the tools available to financial analysts and the considerable room for divergent opinions on key inputs to cost-of-capital estimation. Perhaps for this very reason, and to achieve regulatory efficiency, Canadian regulators widely adopted a formulaic approach to setting return on equity (ROE). However, an unusual degree of rancor has evolved north of the border as allowed ROEs in Canada, once at parity, have fallen near 200-basis points below their U.S. peers.

When Markets Fail

New England grapples with excess capacity and rock-bottom prices.

Bruce W. Radford

Corrosive.” “Seriously flawed.” On the “brink of market failure.”That’s what critics say about New England’s forward capacity market (FCM), whereby ISO New England conducts auctions to solicit offers from project developers to make electric capacity available three years into the future to meet anticipated regional demand.

Beyond Intermittency

Forecasting brings wind energy under control.

Michael T. Burr

Advancements in forecasting have improved the reliability of day-ahead and hour-ahead estimates of wind generation. Wind never will behave like a base-load power plant. But as system operators integrate wind forecasts into their planning and market processes, they’re transforming intermittent wind energy into a variable but reliable resource.

Green Job Realities

Quantifying the economic benefits of generation alternatives.

Donald Harker and Peter Hans Hirschboeck

Are renewables truly marking the start of a new economy, creating both economic growth and reliable jobs? Answering that question takes a complex analysis, but the numbers suggest green benefits might be smaller than expected.

FIT in the USA

Constitutional questions about state-mandated renewable tariffs.

Steven Ferrey et al.

Despite state efforts to follow the European model of state-mandated feed-in tariffs to promote renewable power, these actions won’t pass Constitutional muster. The Supremacy Clause makes a formidable legal barrier to states’ FIT policies.

The Utah Test

Defining a test period to overcome controversies and inaccuracies.

Joni S. Zenger et al.

Test-period and test-year selection continue to generate controversy in rate cases. Examples from Utah provide insight on the difficulties of forecasting and with judging test periods.

Reconsidering Resource Adequacy, Part 2

Capacity planning for the smart grid.

James F. Wilson

The one-day-in-10-years criterion for capacity planning is coming under scrutiny. Making the most of the smart grid and demand management requires a less conservative approach. Markets and prices rather than administrative rules will ensure resource adequacy in a more efficient way.

Strategic Leadership

Get ready for fundamental changes.

Paul A. Dumais

In almost all business and non-profit environments, change is occurring at an accelerating pace. In the electric industry—which used to be stable—we are seeing major changes too. Utilities face growing ambiguity as well as increasing paces of change, uncertainty and complexity. As Irene Sanders stated in Strategic Thinking and the New Science, “[t]hat the future will be different from today is given. What we struggle with is our desire to know how it will be different and what we can do to influence it.”1

The Incredible Shrinking Reactor

Small is beautiful for nuclear developers.

William Atkinson

Small modular reactors (SMRs) are nuclear generating units that are about the size of railroad cars and provide about one-tenth to one-fourth the power of full-size reactors. As a result, they cost a fraction of what full-size reactors cost. The reactors are designed to provide between 40 MW and 300 MW of electric power, compared with the 1,100 to 1,700 MW output of larger reactors. In addition, most are expected to cost under $1 billion, compared with the $5 billion to $10 billion price tags of the larger units.

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