Ring Fencing In Utah

Deck: 

Regulatory structures protect ratepayers in geography-spanning utility mergers.

Fortnightly Magazine - February 2008
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Corporate restructurings of electric utilities in the United States have become a significant and controversial issue during the past thirty years.1 The controversy is caused by differing perspectives among electric utility executives and regulatory commissioners relating to corporate restructurings associated with mergers, diversification, and functional separation of generation, transmission, and distribution.

Electric utility executives generally view corporate restructuring as a potential source of economic value and a potential partial solution to financial problems that reflect changing business risks. On the other hand, regulatory commissioners attempt to insulate and regulate the utility component of the restructured energy business and to protect the public interest, including reliability of service at reasonable costs.

A prime example is the Utah Public Service Commission, which is applying ring-fencing conditions and tools to utility PacifiCorp. The geographic diversity of PacifiCorp poses regulatory problems to its new owner, MidAmerican Energy, which may require solutions similar to approaches that have been applied to the legal, financial, and economic issues related to ring-fencing of energy utility companies.

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