Competition in the Electric Industry Emerging Issues, Opportunities, and Risks for Facility Operators (1996) / Chapter Skim
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The Restructuring of California's Electric Industry: A Utility's Perspective
The Restructuring of California's Electric Industry: A Utility's Perspective
Pages 35-43
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From page 35... ...
Both Pacific Gas and Electric and the Southern California Edison Company, within the past five or six weeks, have filed proposed processes for making such partial divestitures. It is important to recognize that generation is not, in fact, being deregulated.
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From page 36... ...
investments in nuclear generation and (b) contracts entered into with so-called "qualified facilities" (that is, independent power producers from whom utilities must purchase power pursuant to the Public Utility Regulatory Policies Act of 1978~.
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From page 37... ...
There is already a very active wholesale spot market with many participants in the western United States. The price disparities within and between states are the result of long-term resource commitments, not the result of paying more or less on the spot market.
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From page 38... ...
Under the federal Public Utilities Regulatory Policy Act of 1978, these independent generators must be paid on the basis of "avoided costs" by utilities, that is, according to a generous formula based on the costs the utilities would have incurred by adding equivalent amounts of their own capacity. Utilities view that requirement as inconsistent with a competitive market.
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From page 39... ...
States would then be able to attach their charges for public purpose programs and stranded costs to the distribution tariffs or delivery charges. Still, unbundling transmission and distribution services makes room for many different legal theories.
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From page 40... ...
it is widely agreed that the low spot market prices and excess demand that now typify the markets mean that utilities cannot recover their full long-term investments simply through spot market pricing revenues. The deficiencies are "stranded" costs.
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From page 41... ...
. Stranded costs fall into several categories: contracts with qualified facilities, utility-owned generation, regulatory commitments such as deferred taxes and nuclear decommissioning charges, and public purpose programs such as demand side management, low income rate assistance programs, and perhaps also resource diversity programs.
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From page 42... ...
Meanwhile, stranded costs will be calculated based on the difference between embedded costs and market prices during that period. When the utilities move to market valuation, the value of each resource will be assessed.
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From page 43... ...
For a time there will be also a Competition Transition Charge. Conclusion The Southern California Edison Company is prepared to compete for customers' business in this new environment.
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