NUGs Take the Cake
I take great exception to the presumption of Messrs. Costello, Burns, and Hegazy ("How State Regulators Should Handle Retail Wheeling," Feb. 15, 1995) that retail wheeling's "day will come." This is the oft repeated but never proven siren's song of Elcon's John Anderson and the other industrial/ cogeneration groups. The authors write: "For retail wheeling to become politically palatable, legislatures and PUCs must address the question of how to minimize the negative effects on core customers in the short term." Why?
Why must core customers suffer any negative effects so that a few industrial customers can benefit in the short term? The incentives are clear. Retail wheeling is attractive to nonutility generators (NUGs) today because the short-term marginal cost of generation is below the average cost of electricity for most utilities. Why should NUGs sell to utilities at a price based on their own marginal cost if they can sell at a discount off the utility's embedded price?