The debate over restructuring the electric industry has encompassed a revisiting of the traditional rate-of-return (ROR) pricing model. Parties of widely divergent interests increasingly advocate alternatives. Under the label "performance-based regulation," these new pricing models share the objective of strengthening incentives for electric utilities incentives to pursue some specified "socially desirable" outcome.
they fit into a restructured industry?
Put 45 energy service companies (ESCos) into a $1-billion market, and they easily average over $20 million each. That's almost four dozen companies exploiting a niche an eighth the size of the microprocessor industry.
So it's easy to understand why new ESCos, half with utility roots, enter the fray weekly.
The beleaguered Public Utilities Regulatory Policies Act of 1978 (PURPA) has a new assailant (em U.S. Rep. Cliff Stearns (R-FL). Stearns's bipartisan legislation, H.R. 2562, the "Ratepayer Protection Act," proposes repeal of section 210 of PURPA, which requires electric utilities to purchase power at avoided costs.
When an electric utility invests in a resource to serve its customers, it does so with the belief that the asset underlying the investment can be pledged as collateral to secure debt capital. But what happens if the asset is not owned by the company and, therefore, provides no collateral? The following situations illustrate:
Situation A
Electric utility "A" chooses to build a small generating plant to meet the future needs of its growing customer base.
demand-side management (DSM).1
With broad-based support from utilities, consumer representatives, environmentalists, the California Public Utilities Commission (CPUC), and the California Energy Commission (CEC), some $1.8 billion has been spent since 1990 (and $
Electric utilities nationwide are attempting to retreat from commitments to energy efficiency (em a retreat that will benefit few customers, while damaging many. This retreat is driven by fear of retail wheeling (em that consumers will be able to shop for the lowest prices among competing entities. In turn, the threat of retail wheeling has spurred utilities to a frantic scramble to cut costs and trim rates.
The National Hydropower Association (NHA) has asked the Federal Energy Regulatory Commission (FERC) to reform its regulations governing the relicensing of hydroelectric projects. No legislation would be involved.
Efforts to site new facilities for the disposal of hazardous waste (HW) and radioactive waste have met with utter paralysis. HW disposal companies have spent hundreds of millions of dollars trying to site new landfills and incinerators for this waste, but most of this money has gone down the drain. Since the enactment of the chief federal law on HW, the Resource Conservation and Recovery Act of 1976 (RCRA), only one new HW landfill has opened on a new site in the United States (in prophetically named Last Chance, CO).
The nonstop dialogue about retail wheeling, power brokers, PoolCos, and restructuring overlooks customers and their increasing thirst for value-added services. Aside from a few emphatic words by some industrial users, little has been said about customer expectations. This article offers a snapshot of the brave new world of energy service marketing (ESM). ESM will take the place of demand-side management (DSM) and electricity marketing, blending the best of both.
ESM is simple.