Pay-as-Bid vs. Uniform Pricing

Discriminatory auctions promote strategic bidding and market manipulation.

Some advocates claim markets can help reduce electricity prices by changing the design of wholesale auctions. However, taking a pay-as-bid approach could make matters worse.

Greening IOU Equities

Low-carbon strategies are yielding rewards for shareholders.

Low-carbon and “green” strategies have begun delivering returns for utility shareholders. Whether a company ultimately wins or loses depends on how markets are pricing the risks of possible carbon-control regimes.

Nuclear Fuel Future

Nuclear power cost projections should incorporate fuel cost uncertainties.

Nuclear fuel cost projections typically consist of current reported costs that are escalated at the rate of inflation. These projections usually consist of a single estimate in each year. In the past, when nuclear fuel costs were low and declining, this approach was acceptable and may have even been conservative. But this approach is likely to understate projected nuclear fuel cost when nuclear fuel costs are increasing.

Letters to the Editor

Before the hearings started, I felt the number of critical cyber assets for a medium size utility would be on the order of several thousand, not 20 as some major utilities are identifying under the CIP standards. This should be a red flag for the industry.

Sticker Shock!

Increasing prices for materials, equipment and services are driving utility infrastructure costs into uncharted territory.

The evidence is overwhelming: After a decade of relatively stable, or even declining, construction costs, the industry is now facing a prolonged period of elevated construction price tags. What are the causes behind this trend, and how might the cost increases translate into higher rates?

Earning on Conservation

An earnings-equivalence model helps utilities and regulators calculate appropriate returns for conservation investments.

Traditionally, utility shareholders and their utilities have a bias toward supply-side resources as opposed to demand-side reduction programs. Reductions in demand may result in excess supply-side resources that are likely to be excluded from rate base because they do not meet the “used and useful” standard. However, there is a solution: Allow energy utilities to benefit from earnings rewards for demand-side reduction. From an earnings perspective, such a solution would place demand-side alternatives on par with supply-side projects.

The Wonderful Curse

Production constraints and demand pressures mean high gas prices are here to stay.

Volatility in energy prices is both a scary and wonderful thing. It brings risks that must be managed under uncertain future conditions. It also brings opportunities to profit from price movement and competitive market advantages exploited through strategy, skill and luck. Just how good the outcome of such volatility can be depends on how well each market participant studies the fundamentals, manages uncertainty and remains flexible.

Messing With Texas

Armed with calls for gas price transparency, FERC takes aim at intrastate pipelines—the long-forgotten and largely private preserve of the Lone Star State.

Federal Energy Regulatory Commission (FERC) has proposed to bring a modicum of federal oversight to the nation’s intrastate natural-gas pipelines. Given the historical structure and regulation of the nation’s natural-gas industry, it should come as no surprise that FERC’s proposal has polarized the industry in general and the state of Texas in particular.

Letters to the Editor

A lengthy letter to the editor addresses whether the Energy Information Administration’s gas-market forecasts, as laid out in a recent article, are biased. The authors of the original piece, Timothy J. Considine and Frank A. Clemente, then respond to the letter.

Gas-Market Forecasts: Betting on Bad Numbers

Why predictions from the Energy Information Administration may contain systematic errors.

Natural-gas estimates from the Energy Information Administration (EIA) are supposed to be “policy neutral.” Are they? Over the past decade, EIA forecasts for NG differ substantially from actual outcomes—even though overestimations of supply capabilities could lead to underestimating the costs of carbon regulations.