Supply Side Management Options

SSM options for an electric utility include its own generating resources and the potential to purchase power from other utility networks or from IPPs and cogenera-

tors. The price of ongoing power purchases from IPPs and cogenerators, as defined by PURPA, was originally based on the utility's avoided cost. Purchases from all other power producers, including non-qualifying facility cogenerators and electric wholesale generators (EWGs), are based on competitive bidding to meet additional utilitygenerating resource requirements. Many states now use competitive bidding for selection of all supply resources.

Competitive Bidding

Primarily because of substantial forecasting problems, alternatives to simple formula valuations for purchased power have been developed over the past decade. During this period, numerous state jurisdictions have found that rigid projections for the value of purchased power were wrong and, in many cases, too high. Moreover, many contracts established in earlier periods were later found to be over-priced as a result of incorrect assumptions on demand growth and fuel pricing. For these reasons, utility-forecasted avoided cost is often regarded somewhat critically by state regulators.

To avoid forecasting problems, competitive bidding was an attempt to establish a competitive "avoided-cost" level against which utilities could measure their own cost-to-build capacity. Cogeneration groups originally argued that such bidding was contrary to PURPA, because, in effect, what was paid was lower than actual utility constructed generation costs. However, competitive bidding became an integral part of utility IRP programs and was mandated by many utility commissions.

While the bidding process solved many of the fore

Table 20-1 Summary of Benefit/Cost Components In Five Standard Tests (1)

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