2086 Moving towards a deregulated electric power marketplace

EPACT-1992 set into motion a widespread movement for utilities to become more competitive. Retail wheeling proposals were set into motion in states such as California, Wisconsin, Michigan, New Mexico, Illinois and New Jersey. There are many issues involved in a deregulated power marketplace and public service commission rulings and litigation will certainly play a major role in the power marketplace of the future. Deregulation has already brought about several important developments:

• Utilities will need to become more competitive. Downsizing and minimization of costs including elimination of rebates are the current trend. This translates into lower costs for consumers. For example Southern California Edison announced that the system average price will be reduced from 10.7 cents/kWh to lower than 10 cents by the year 2000. This would be a 25% reduction after adjusting for inflation.

• Utilities will merge to gain a bigger market share. For example, Wisconsin Electric Power Company merged with Northern States Power; this merger of two utilities resulted in a savings of $2 billion over 10 years.

• Utilities are forming new companies to broaden their services. Energy service companies, financial loan programs and purchasing of related companies are all part of the new utility strategy.

• In 1995 one hundred power marketing companies have submitted applicants to FERC. Power marketing companies will play a key role in brokering power between end users and utilities in different states and in purchasing of new power generation facilities.

• Utilities will need to restructure to take advantage of deregulation. Generation Companies may be split away from other operating divisions such as transmission and distribution. Vertical disintegration will be part of the new utility structure.

• Utilities will weigh the cost of repowering and upgrading existing plants against purchasing power from a third party.

Chapter 24 discusses many more issues on the topic of electrical deregulation.

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