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Different approaches to estimating transition costs in the electric- utility industry

Description: The term ``transition costs`` describes the potential revenue shortfall (or welfare loss) a utility (or other actor) may experience through government-initiated deregulation of electricity generation. The potential for transition costs arises whenever a regulated industry is subject to competitive market forces as a result of explicit government action. Federal and state proposals to deregulate electricity generation sparked a national debate on transition costs in the electric-utility industry. Industry-wide transition cost estimates range from about $20 billion to $500 billion. Such disparate estimates raise important questions on estimation methods for decision makers. This report examines different approaches to estimating transition costs. The study has three objectives. First, we discuss the concept of transition cost. Second, we identify the major cost categories included in transition cost estimates and summarize the current debate on which specific costs are appropriately included in these estimates. Finally, we identify general and specific estimation approaches and assess their strengths and weaknesses. We relied primarily on the evidentiary records established at the Federal Energy Regulatory Commission and the California Public Utilities Commission to identify major cost categories and specific estimation approaches. We also contacted regulatory commission staffs in ten states to ascertain estimation activities in each of these states. We refined a classification framework to describe and assess general estimation options. We subsequently developed and applied criteria to describe and assess specific estimation approaches proposed by federal regulators, state regulators, utilities, independent power companies, and consultants.
Date: October 1, 1995
Creator: Baxter, L.W.
Partner: UNT Libraries Government Documents Department

Assessment of net lost revenue adjustment mechanisms for utility DSM programs

Description: Utility shareholders can lose money on demand-side management (DSM) investments between rate cases. Several industry analysts argue that the revenues lost from utility DSM programs are an important financial disincentive to utility DSM investment. A key utility regulatory reform undertaken since 1989 allows utilities to recover the lost revenues incurred through successful operation of DSM programs. Explicitly defined net lost revenue adjustment (NLRA) mechanisms are states` preferred approach to lost revenue recovery from DSM programs. This report examines the experiences states and utilities are having with the NLRA approach. The report has three objectives. First, we determine whether NLRA is a feasible and successful approach to removing the lost-revenue disincentive to utility operation of DSM programs. Second, we identify the conditions linked to successful implementation of NLRA mechanisms in different states and assess whether NLRA has changed utility investment behavior. Third, we suggest improvements to NLRA mechanisms. We first identify states with NLRA mechanisms where utilities are recovering lost revenues from DSM programs. We interview staff at regulatory agencies in all these states and utility staff in four states. These interviews focus on the status of NLRA, implementation issues, DSM measurement issues, and NLRA results. We also analyze regulatory agency orders on NLRA, as well as associated testimony, reports, and utility lost revenue recovery filings. Finally, we use qualitative and quantitative indicators to assess NLRA`s effectiveness. Contrary to the concerns raised by some industry analysts, our results indicate NLRA is a feasible approach to the lost-revenue disincentive.
Date: January 1, 1995
Creator: Baxter, L.W.
Partner: UNT Libraries Government Documents Department

Net lost revenue from DSM: State policies that work

Description: A key utility regulatory reform undertaken since 1989 allows utilities to recover the lost revenue incurred through successful operation of demand-side management (DSM) programs. Net lost revenue adjustment (NLRA) mechanisms are states preferred approach to lost revenue recovery from DSM programs. This paper examines the experiences states and utilities are having with the NLRA approach. The paper has three objectives: (1) determine whether NLRA is a feasible and effective approach to the lost-revenue disincentive for utility DSM programs, (2) identify the conditions linked to effective implementation of NLRA mechanisms and assess whether NLRA has changed utility investment behavior, and (3) suggest improvements to NLRA mechanisms. Contrary to the concerns raised by some industry analysts, our results indicate NLRA is a feasible approach. Seven of the ten states we studied report no substantial problems with their approach. We observe several conditions linked to effective NLRA implementation. Observed changes in utility investment behavior occur after implementation of DSM rate reforms, which include deployment of NLRA mechanisms. Utilities in states with lost revenue recovery invest more than twice as much in DSM as do utilities in other states.
Date: July 1, 1995
Creator: Baxter, L.W.
Partner: UNT Libraries Government Documents Department

Applying DSM evaluation results to utility planning

Description: This paper describes the results of a study to assess the application of DSM evaluation results to utility forecasting and planning. The paper has three objectives: (1) identify forecasting and planning applications of evaluation studies, (2) identify major obstacles and problems associated with applying evaluation results to forecasting and planning, and (3) suggest approaches to address the major problems. The paper summarizes results from interviews with utilities, regulators, and consultants to determine how the utility industry currently applies evaluation results in forecasting and planning. The paper also includes results from a detailed case study of Sacramento Municipal Utility District (SMUD) and Southern California Edison Company (SCE), two utilities with large DSM programs and active evaluation efforts.
Date: July 1, 1995
Creator: Baxter, L.W.
Partner: UNT Libraries Government Documents Department

The release of iron during coal combustion. Milestone report

Description: Iron plays an important role in the formation of both fly ash and deposits in many pulverized-coal-fired boilers. Several authors indicate that iron content is a significant indicator of the slagging propensity of a majority of US bituminous coals, in particular eastern bituminous coals. The pyritic iron content of these coals is shown to be a particularly relevant consideration. A series of investigations of iron release during combustion is reported for a suite of coals ranging in rank from lignite to low-volatile bituminous coal under combustion conditions ranging from oxidizing to inert. Experimental measurements are described in which, under selected conditions, major fractions of the iron in the coal are released within a 25 ms period immediately following coal devolatilization. Mechanistic interpretation of the data suggest that the iron is released as a consequence of oxygen attack on porous pyrrhotite particles. Experimental testing of the proposed mechanism reveals that the release is dependent on the presence of both pyrite in the raw coal and oxygen in the gas phase, that slow preoxidation (weathering) of the pyrite significantly inhibits the iron release, and that iron loss increases as oxygen penetration of the particle increases. Each observation is consistent with the postulated mechanism.
Date: June 1, 1995
Creator: Baxter, L.L.
Partner: UNT Libraries Government Documents Department

Coal char fragmentation during pulverized coal combustion

Description: A series of investigations of coal and char fragmentation during pulverized coal combustion is reported for a suite of coals ranging in rank from lignite to low-volatile (lv) bituminous coal under combustion conditions similar to those found in commercial-scale boilers. Experimental measurements are described that utilize identical particle sizing characteristics to determine initial and final size distributions. Mechanistic interpretation of the data suggest that coal fragmentation is an insignificant event and that char fragmentation is controlled by char structure. Chars forming cenospheres fragment more extensively than solid chars. Among the chars that fragment, large particles produce more fine material than small particles. In all cases, coal and char fragmentation are seen to be sufficiently minor as to be relatively insignificant factors influencing fly ash size distribution, particle loading, and char burnout.
Date: July 1, 1995
Creator: Baxter, L.L.
Partner: UNT Libraries Government Documents Department

Release of inorganic material during coal devolatilization. Milestone report

Description: Experimental results presented in this paper indicate that coal devolatilization products convectively remove a fraction of the nonvolatile components of inorganic material atomically dispersed in the coal matrix. Results from three facilities burning six different coals illustrate this mechanism of ash transformation and release from coal particles. Titanium is chosen to illustrate this type of mass release from coal particles on the basis of its low volatility and mode of occurrence in the coal. During moderate rates of devolatilization (10{sup 4} K/s heating rate), no significant loss of titanium is noted. At more rapid rates of heating/devolatilization (10{sup 5} K/s) a consistent but minor (3-4 %) loss of titanium is noted. During rapid devolatilization (5xl0{sup 5} K/s and higher), significant (10-20 %) amounts of titanium leave the coal. The loss of titanium monitored in coals ranging in rank from subbituminous to high-volatile bituminous coals and under conditions typical of pulverized-coal combustion. The amount of titanium lost during devolatilization exhibits a complex rank dependence. These results imply that other atomically dispersed material (alkali and alkaline earth elements) may undergo similar mechanisms of transformation and release.
Date: July 1, 1995
Creator: Baxter, L.L.
Partner: UNT Libraries Government Documents Department

STATISTICAL SAMPLING FOR IN-SERVICE INSPECTION OF LIQUID WASTE TANKS AT THE SAVANNAH RIVER SITE

Description: Savannah River Remediation, LLC (SRR) is implementing a statistical sampling strategy for In-Service Inspection (ISI) of Liquid Waste (LW) Tanks at the United States Department of Energy's Savannah River Site (SRS) in Aiken, South Carolina. As a component of SRS's corrosion control program, the ISI program assesses tank wall structural integrity through the use of ultrasonic testing (UT). The statistical strategy for ISI is based on the random sampling of a number of vertically oriented unit areas, called strips, within each tank. The number of strips to inspect was determined so as to attain, over time, a high probability of observing at least one of the worst 5% in terms of pitting and corrosion across all tanks. The probability estimation to determine the number of strips to inspect was performed using the hypergeometric distribution. Statistical tolerance limits for pit depth and corrosion rates were calculated by fitting the lognormal distribution to the data. In addition to the strip sampling strategy, a single strip within each tank was identified to serve as the baseline for a longitudinal assessment of the tank safe operational life. The statistical sampling strategy enables the ISI program to develop individual profiles of LW tank wall structural integrity that collectively provide a high confidence in their safety and integrity over operational lifetimes.
Date: April 7, 2011
Creator: Harris, S. & Baxter, L.
Partner: UNT Libraries Government Documents Department

Estimating Potential Stranded Commitments for U.S. Investor-Owned Electric Utilities

Description: New technologies, low natural gas prices, and federal and state utility regulations are restructuring the electricity industry. Yesterday's vertically integrated utility with a retail monopoly franchise may be a very different organization in a few years. Conferences, regulatory-commission hearings, and other industry fora are dominated by debates over the extent and form of utility deintegration, wholesale competition, and retail wheeling. A key obstacle to restructuring the electricity industry is stranded commitments. Past investments, power-purchase contracts, and public-policy-driven programs that made sense in an era of cost-of-service regulation may not be cost-effective in a competitive power market. Regulators, utilities, and other parties face tough decisions concerning the mitigation and allocation of these stranded commitments. We developed and applied a simple method to calculate the amount of stranded commitments facing U.S. investor-owned electric utilities. The results obtained with this method depend strongly on a few key assumptions: (1) the fraction of utility sales that is at risk with respect to competition, (2) the market price of electric generation, and (3) the number of years during which the utility would lose money because of differences between its embedded cost of production and the market price.
Date: January 1, 1995
Creator: Baxter, L.
Partner: UNT Libraries Government Documents Department

Assessing strategies to address transition costs in a restructuring electricity industry

Description: Restructuring the US electricity industry has become the nation`s central energy issue for the 1990s. Restructuring proposals at the federal and state levels focus on more competitive market structures for generation and the integration of transmission within those structures. The proposed move to more competitive generation markets will expose utility costs that are above those experienced by alternative suppliers. Debate about these above-market, or transition, costs (e.g., their size,who will pay for them and how) has played a prominent role in restructuring proceedings. This paper presents results from a project to systematically assess strategies to address transition costs exposed by restructuring the electricity industry.
Date: August 1, 1996
Creator: Baxter, L.; Hadley, S. & Hirst, E.
Partner: UNT Libraries Government Documents Department

Factors that affect electric-utility stranded commitments

Description: Estimates of stranded commitments for U.S. investor-owned utilities range widely, with many falling in the range of $100 to $200 billion. These potential losses exist because some utility-owned power plants, long-term power-purchase contracts and fuel-supply contracts, regulatory assets, and expenses for public-policy programs have book values that exceed their expected market values under full competition. This report quantifies the sensitivity of stranded- commitment estimates to the various factors that lead to these above- market-value estimates. The purpose of these sensitivity analyses is to improve understanding on the part of state and federal regulators, utilities, customers, and other electric-industry participants about the relative importance of the factors that affect stranded- commitment amounts.
Date: July 1, 1996
Creator: Hirst, E.; Hadley, S. & Baxter, L.
Partner: UNT Libraries Government Documents Department

Laboratory illustrations of the transformations and deposition of inorganic material in biomass boilers

Description: Boilers fired with certain woody biomass fuels have proven to be a viable, reliable means of generating electrical power. The behavior of the inorganic material in the fuels is one of the greatest challenges to burning the large variety of fuels available to biomass combustors. Unmanageable ash deposits and interactions between ash and bed material cause loss in boiler availability and significant increase in maintenance costs. The problems related to the behavior of inorganic material now exceed all other combustion-related challenges in biomass-fired boilers. This paper reviews the mechanisms of ash deposit formation, the relationship between fuel properties and ash deposit properties, and a series of laboratory tests in Sandia`s Multifuel Combustor designed to illustrate how fuel type, boiler design, and boiler operating conditions impact ash deposit properties.
Date: August 1, 1995
Creator: Baxter, L.L. & Jenkins, B.M.
Partner: UNT Libraries Government Documents Department

Methods to estimate stranded commitments for a restructuring US electricity industry

Description: Estimates of stranded commitments for US investor-owned electric utilities range widely, from as little as $20 billion to as much as $500 billion (more than double the shareholder equity in US utilities). These potential losses are a consequence of the above-market book values for some utility-owned power plants, long-term power-purchase contracts, deferred income taxes, regulatory assets, and public-policy programs. Because of the wide range of estimates and the potentially large dollar amounts involved, state and federal regulators need a clear understanding of the methods used to calculate these estimates. In addition, they may want simple methods that they can use to check the reasonableness of the estimates that utilities and other parties present in regulatory proceedings. This report explains various top-down and bottom-up methods to calculate stranded commitments. The purpose of this analysis is to help regulators and others understand the implications of different analytical approaches to estimating stranded-commitment amounts. Top-down methods, because they use the utility as the unit of analysis, are simple to apply and to understand. However, their aggregate nature makes it difficult to determine what specific assets and liabilities affect their estimates. Bottom-up methods use the individual asset (e.g., power plant) or liability (e.g., power-purchase contract, fuel-supply contract, and deferred income taxes) as the unit of analysis. These methods have substantial data and computational requirements.
Date: January 1, 1996
Creator: Hirst, E.; Hadley, S. & Baxter, L.
Partner: UNT Libraries Government Documents Department

Recent program evaluations: Implications for long-run planning

Description: Demand-side management (DSM) remains the centerpiece of California`s energy policy. Over the coming decade, California plans to meet 30 percent of the state`s incremental electricity demand and 50 percent of its peak demand with (DSM) programs. The major investor-owned utilities in California recently completed the first round of program impact studies for energy efficiency programs implemented in 1990 and 1991. The central focus of this paper is to assess the resource planning and policy implications of Pacific Gas and Electric (PG&E) Company`s recent program evaluations. The paper has three goals. First, we identify and discuss major issues that surfaced from our attempt to apply evaluation results to forecasting and planning questions. Second, we review and summarize the evaluation results for PG&E`s primary energy efficiency programs. Third, we change long-run program assumptions, based on our assessment in the second task, and then examine the impacts of these changes on a recent PG&E demand-side management forecast and resource plan.
Date: June 8, 1994
Creator: Baxter, L.W. & Schultz, D.K.
Partner: UNT Libraries Government Documents Department

Transition costs in the electricity industry: A summary of issues

Description: Progress is evident as the restructuring debate in the U.S. electricity industry completes its third year. The Federal Energy Regulatory Commission released a final rule on transmission open access-a key element to facilitate more efficient wholesale markets. The majority of states have initiated investigations or discussions on restructuring retail markets. Yet hurdles remain in formulating and implementing state-level restructuring proposals. Perhaps foremost among these hurdles is the issue of transition costs (the potential monetary losses experienced by utilities, consumers, and other economic actors as a result of government initiatives to transform electricity generation from a regulated to a competitive market). Transition costs are approximately equal to the difference between the embedded cost for generation services under traditional cost-of-service regulation and the competitive-market price for power. When government takes action to open current monopoly franchises to multiple generation providers and the competitive-market price falls below embedded generation costs, then transition costs will arise. Transition costs will include one or more of the following four classes of costs: (1) assets, primarily utility-owned power plants; (2) liabilities, primarily long-term power-purchase and fuel-supply contracts; (3) regulatory assets, including deferred expenses and costs that regulators allow utilities to place on their balance sheets; and (4) public-policy programs, such as energy efficiency, low-income programs, and research and development. What is at issue in the transition-cost debate? The debate turns on four questions: (1) How large are the potential transition costs from restructuring? (2) How are these costs estimated? (3) What, if anything, might be done to address these costs? (4) Who will ultimately pay for any remaining costs and how? This paper summarizes some of the key results from a project at ORNL that addresses these four questions.
Date: October 1, 1996
Creator: Baxter, L.; Hirst, E. & Hadley, S.
Partner: UNT Libraries Government Documents Department

Strategies to address transition costs in the electricity industry

Description: Transition costs are the potential monetary losses that electric- utility shareholders, ratepayers, or other parties might experience because of structural changes in the electricity industry. Regulators, policy analysts, utilities, and consumer groups have proposed a number of strategies to address transition costs, such as immediately opening retail electricity markets or delaying retail competition. This report has 3 objectives: identify a wide range of strategies available to regulators and utilities; systematically examine effects of strategies; and identify potentially promising strategies that may provide benefits to more than one set of stakeholders. The many individual strategies are grouped into 6 major categories: market actions, depreciation options, rate-making actions, utility cost reductions, tax measures, and other options. Of the 34 individual strategies, retail ratepayers have primary or secondary responsibility for paying transition costs in 19 of the strategies, shareholders in 12, wheeling customers in 11, taxpayers in 8, and nonutility suppliers in 4. Most of the strategies shift costs among different segments of the economy, although utility cost reductions can be used to offset transition costs. Most of the strategies require cooperation of other parties, including regulators, to be implemented successfully; financial stakeholders must be engages in negotiations that hold the promise of shared benefits. Only by rejecting ``winner-take-all`` strategies will the transition-cost issue be expeditiously resolved.
Date: July 1, 1996
Creator: Baxter, L.; Hadley, S. & Hirst, E.
Partner: UNT Libraries Government Documents Department

Combustion Tests of Rocket Motor Washout Material: Focus on Air toxics Formation Potential and Asbestos Remediation

Description: The objective of this investigation is to determine the suitability of cofiring as a recycle / reuse option to landfill disposal for solid rocket motor washout residue. Solid rocket motor washout residue (roughly 55% aluminum powder, 40% polybutadiene rubber binder, 5% residual ammonium perchlorate, and 0.2-1% asbestos) has been fired in Sandia's MultiFuel Combustor (MFC). The MFC is a down-fired combustor with electrically heated walls, capable of simulating a wide range of fuel residence times and stoichiometries. This study reports on the fate of AP-based chlorine and asbestos from the residue following combustion.
Date: February 1, 1999
Creator: Sclippa, G. C.; Baxter, L. L. & Buckley, S. G.
Partner: UNT Libraries Government Documents Department

Low-income energy policy in a restructuring electricity industry: an assessment of federal options

Description: This report identifies both the low-income energy services historically provided in the electricity industry and those services that may be affected by industry restructuring. It identifies policies that are being proposed or could be developed to address low- income electricity services in a restructured industry. It discusses potential federal policy options and identifies key policy and implementation issues that arise when considering these potential federal initiatives. To understand recent policy development at the state level, we reviewed restructuring proposals from eight states and the accompanying testimony and comments filed in restructuring proceedings in these states.
Date: July 1, 1997
Creator: Baxter, L.W.
Partner: UNT Libraries Government Documents Department

Experimental measurements of the thermal conductivity of ash deposits: Part 1. Measurement technique

Description: This paper describes a technique developed to make in situ, time-resolved measurements of the effective thermal conductivity of ash deposits formed under conditions that closely replicate those found in the convective pass of a commercial boiler. Since ash deposit thermal conductivity is thought to be strongly dependent on deposit microstructure, the technique is designed to minimize the disturbance of the natural deposit microstructure. Traditional techniques for measuring deposit thermal conductivity generally do not preserve the sample microstructure. Experiments are described that demonstrate the technique, quantify experimental uncertainty, and determine the thermal conductivity of highly porous, unsintered deposits. The average measured conductivity of loose, unsintered deposits is 0.14 {+-} 0.03 W/(m K), approximately midway between rational theoretical limits for deposit thermal conductivity.
Date: April 1, 2000
Creator: Robinson, A. L.; Buckley, S. G.; Yang, N. & Baxter, L. L.
Partner: UNT Libraries Government Documents Department

Experimental measurements of the thermal conductivity of ash deposits: Part 2. Effects of sintering and deposit microstructure

Description: The authors report results from an experimental study that examines the influence of sintering and microstructure on ash deposit thermal conductivity. The measurements are made using a technique developed to make in situ, time-resolved measurements of the effective thermal conductivity of ash deposits formed under conditions that closely replicate those found in the convective pass of a commercial boiler. The technique is designed to minimize the disturbance of the natural deposit microstructure. The initial stages of sintering and densification are accompanied by an increase in deposit thermal conductivity. Subsequent sintering continues to densify the deposit, but has little effect on deposit thermal conductivity. SEM analyses indicates that sintering creates a layered deposit structure with a relatively unsintered innermost layer. They hypothesize that this unsintered layer largely determines the overall deposit thermal conductivity. A theoretical model that treats a deposit as a two-layered material predicts the observed trends in thermal conductivity.
Date: April 1, 2000
Creator: Robinson, A. L.; Buckley, S. G.; Yang, N. & Baxter, L. L.
Partner: UNT Libraries Government Documents Department

Coal Combustion Science quarterly progress report, April--June 1990

Description: This document provides a quarterly status report of the Coal Combustion Science Program that is being conducted at the Combustion, Research Facility, Sandia National Laboratories, Livermore, California. Coal devolatilization, coal char combustion, and fate of mineral matter during coal combustion. 56 refs., 25 figs., 13 tabs.
Date: November 1, 1990
Creator: Hardesty, D.R. (ed.); Baxter, L.L.; Fletcher, T.H. & Mitchell, R.E.
Partner: UNT Libraries Government Documents Department

Coal combustion science

Description: The objective of this activity is to support the Office of Fossil Energy in executing research on coal combustion science. This activity consists of basic research on coal combustion that supports both the Pittsburgh Energy Technology Center (PETC) Direct Utilization Advanced Research and Technology Development Program, and the International Energy Agency (IEA) Coal Combustion Science Project. Specific tasks include: coal devolatilization, coal char combustion, and fate of mineral matter during coal combustion. 91 refs., 40 figs., 9 tabs.
Date: November 1, 1990
Creator: Hardesty, D.R. (ed.); Baxter, L.L.; Fletcher, T.H. & Mitchell, R.E.
Partner: UNT Libraries Government Documents Department

Compilation of Sandia coal char combustion data and kinetic analyses

Description: An experimental project was undertaken to characterize the physical and chemical processes that govern the combustion of pulverized coal chars. The experimental endeavor establishes a database on the reactivities of coal chars as a function of coal type, particle size, particle temperature, gas temperature, and gas and composition. The project also provides a better understanding of the mechanism of char oxidation, and yields quantitative information on the release rates of nitrogen- and sulfur-containing species during char combustion. An accurate predictive engineering model of the overall char combustion process under technologically relevant conditions in a primary product of this experimental effort. This document summarizes the experimental effort, the approach used to analyze the data, and individual compilations of data and kinetic analyses for each of the parent coals investigates.
Date: June 1, 1992
Creator: Mitchell, R.E.; Hurt, R.H.; Baxter, L.L. & Hardesty, D.R.
Partner: UNT Libraries Government Documents Department