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Pricing local distribution services in a competitive market

Description: Unbundling and restructuring of local distribution services is the focus of the natural gas industry. As a result of regulatory reforms, a competitive local distribution market has emerged, and the validity of traditional cost-based regulation is being questioned. One alternative is to completely unbundle local distribution services and transform the local distribution company into a common carrier for intrastate transportation services. Three kinds of alternative pricing mechanisms are examined. For firm intrastate transportation services, cost-based pricing is the preferred method unless it can be shown that a competitive secondary market can be established and maintained. Pricing interruptible transportation capacity is discussed.
Date: December 1, 1995
Creator: Duann, D.J.
Partner: UNT Libraries Government Documents Department

Post-reform continuation of social goals

Description: Public utility regulators are currently wrestling with the issue of how and to what extent the social goals that have grown up around traditional regulation might be continued in a restructured electric power industry. This report critically examines six mechanisms that could be used for this purpose in the wake of the introduction of competition in the generation segment. Their pros and cons are thoroughly appraised in economic terms.
Date: January 1, 1996
Creator: Graniere, R.J.
Partner: UNT Libraries Government Documents Department

The structure of state utility commissions and protection of the captive ratepayer: Is there a connection? Occasional paper {number_sign}23

Description: While there is a considerable body of literature on regulatory decision making, the dominant theories have emphasized the influence of external factors on commissioners, which largely result in capture. Underlying these theories is the assumption that resources translate into influence. The theory proposed in this research is that while resources are necessary in order to influence commission decisions, they are not sufficient. Instead, their effects are mediated by two conditions: one, the structural characteristics of each state commission, which enable it to acquire and analyze information and two, the attributes of the type of consumer safeguards, e.g. a rate freeze or quality-of-service standards with attached financial penalties, which commissions could have adopted. The guiding research hypothesis is that the greater the ability of the commission to acquire and analyze information, the more likely it is to enact more stringent measures to protect the captive ratepayer. The major implications of this research are two. (1) This research suggests that commissions react not just to political pressure and economic incentives, but also to information. Indeed, this research asserts that information is a significant determinant in the decision making process. (2) Where the general public has neither the knowledge nor the understanding to take a position with regard to an issue, a regulatory commission with greater resources and more professional personnel is more likely to be its champion than is a commission with fewer resources and less professional personnel.
Date: June 1, 1998
Creator: Zearfoss, N.N.
Partner: UNT Libraries Government Documents Department

From monopoly to markets: Milestones along the road. Occasional paper {number_sign}25

Description: This report analyzes developments in the electric utility industry using the tools of transaction cost economics. During the last thirty years, the tools of economic analysis have been substantially expanded--notably, Oliver Williamson, building on the insights of Coase and others, has made significant contributions through his work in developing the new institutional economics, of which transaction cost economics reasoning plays a major role. Because of the relevance of the new institutional economics to public utilities and public utility regulation, the theoretical insights of the new institutional economics have been applied to many aspects of public utility industry structure, governance, and regulation. The contributions of Joskow and Schmalensee are most notable, but many other economists have made theoretical and empirical contributions. These insights are very applicable to the issues that policymakers and regulators are likely to address as electric restructuring progresses. The goal of this report is to synthesize the theoretical work on the new institutional economics with the recent developments in the electric utility industry--most notably, the rapid trend toward competition in electric generation, both in the US and abroad. Transaction-cost-economics reasoning provides an analytical structure for understanding the implications of asset specificity, asymmetric and imperfect information, reputation effects, ex ante contracting costs, ex post contract maladaption issues, and issues that arise because contracts are incomplete. The insights that transaction cost economics can provide are very timely to the debates currently going on with respect to electric restructuring issues.
Date: August 1, 1998
Creator: Olson, W.P.
Partner: UNT Libraries Government Documents Department

An economic and legal perspective on electric utility transition costs

Description: The issue of possibly unrecoverable cost incurred by a utility, or `stranded costs,` has emerged as a major obstacle to developing a competitive generation market. Stranded or transition costs are defined as costs incurred by a utility to serve its customers that were being recovered in rates but are no longer due to availability of lower-priced alternative suppliers. The idea of `stranded cost,` and more importantly arguments for its recovery, is a concept with little basis in economic theory, legal precedence, or precedence in other deregulated industries. The main argument recovery is that the ``regulatory compact`` requires it. This is based on the misconception that the regulator compact is simply: the utility incurs costs on behalf of its customers because of the ``obligation to serve`` so, therefore, customers are obligated to pay. This is a mischaracterization of what the compact was and how it developed. Another argument is that recovery is required for economic efficiency. This presumes, however, a very narrow definition of efficiency based on preventing ``uneconomic`` bypass of the utility and that utilities minimize costs. A broader definition of efficiency and the likelihood of cost inefficiencies in the industry suggest that the cost imposed on customers from inhibiting competition could exceed the gains from preventing uneconomic bypass. Both these issues are examined in this paper.
Date: July 1, 1996
Creator: Rose, K.
Partner: UNT Libraries Government Documents Department

Unbundling the retail gas market: Current activities and guidance for serving residential and small customers

Description: The restructuring of retail gas services has followed a typical pattern for previously heavily regulated industries: large customers are initially given rights to purchase unbundled services from different entities, with the same rights dispersed over time to smaller customers. For about ten years now industrial customers in most states have been able to {open_quotes}play the market{close_quotes}. Since the passage of the Federal Energy Regulatory Commission (FERC) Order 636 in 1992, interest has centered on expanding service unbundling to small retail customers, including residential customers. Importantly, the Order prohibited pipelines from providing bundled sales service. This is not surprising - in the telecommunications industry, for example, the unbundling of wholesale services was a strong stimulant for developing competition in the local exchange market. The push for small-customer service unbundling has derived from the basic but politically attractive idea that all retail customers should directly benefit from competitive forces in the natural gas industry. When one looks at the movement of prices since 1985, it is easy to see that large retail customers have enjoyed more favorable prices than other retail customers. For example, over the period 1985 to 1994 gas prices to industrial customers and electric utilities fell around 23 percent and 36 percent, respectively. In comparison, gas prices to residential customers increased by around 5 percent while gas prices to commercial customers decreased slightly by about 1 percent. This report examines various aspects of unbundling to small retail gas customers, with special emphasis on residential customers.
Date: May 1, 1996
Creator: Costello, K.W. & Lemon, J.R.
Partner: UNT Libraries Government Documents Department

Antitrust concerns in the modern public utility environment

Description: Direct regulation of public utility activity and behavior has been the predominant approach to protect the public interest in this country. Changes in technology, as well as new thinking about the optimum role of regulation, have created a changing atmosphere in all of the traditional public utility industries. Competitive markets for many of the products and services in these industries have been developing. While monopoly power will continue to exist in certain parts of these industries and require direct regulation, in many areas a growing reliance upon competition as the best method of serving the public interest is developing. With this shift in emphasis from regulation to free markets, the antitrust laws take on new importance for these industries. In the absence of direct regulator control, those laws are society`s primary method of insuring the markets necessary to make competition an effective device for protecting the public interest. This study provides an overview of the antitrust laws, briefly describes the applicable theoretical underpinnings, and then turns to areas where public utility activity may pose special problems or conflicts with prevailing antitrust policy.
Date: April 1, 1996
Creator: Meeks, J.E.
Partner: UNT Libraries Government Documents Department

The use of information systems to transform utilities and regulatory commissions: The application of geographic information systems

Description: One technology that can assist utilities remain financially viable in competitive markets and help utilities and regulators to better serve the public is information technology. Because geography is an important part of an electric, natural gas, telecommunications, or water utility, computer-based Geographic Information Systems (GIS) and related Automated Mapping/Facilities Management systems are emerging as core technologies for managing an ever-expanding variety of formerly manual or paper-based tasks. This report focuses on GIS as an example of the types of information systems that can be used by utilities and regulatory commissions. Chapter 2 provides general information about information systems and effects of information on organizations; Chapter 3 explores the conversion of an organization to an information-based one; Chapters 4 and 5 set out GIS as an example of the use of information technologies to transform the operations of utilities and commissions; Chapter 6 describes the use of GIS and other information systems for organizational reengineering efforts; and Chapter 7 examines the regulatory treatment of information systems.
Date: September 1, 1995
Creator: Wirick, D.W.; Montgomery, G.E.; Wagman, D.C. & Spiers, J.
Partner: UNT Libraries Government Documents Department

Information risk in emerging utility markets: The role of commission- sponsored audits

Description: As public utilities and regulators begin to define their new relationship under various forms of regulations, some have questioned the continuing need for commission-sponsored audits. This study evaluates the role of such audits by examining their core purpose: the reduction of information risk (risk that a commission might make a wrong decision because of reliance on faulty information). It identifies five generic types of information that will be needed by commissions in the future and describes a cost-benefit analysis for identifying the appropriate method for mitigating information risk for state regulatory commissions.
Date: March 1, 1996
Creator: Wirick, D.W.; Lawton, R.W.; Burns, R.E. & Lee, S.
Partner: UNT Libraries Government Documents Department

Survey of state regulatory activities on least cost planning for gas utilities

Description: Integrated resource planning involves the creation of a process in which supply-side and demand-side options are integrated to create a resource mix that reliably satisfies customers' short-term and long-term energy service needs at the lowest cost. Incorporating the concept of meeting customer energy service needs entails a recognition that customers' costs must be considered along with the utility's costs in the economic analysis of energy options. As applied to gas utilities, an integrated resource plan seeks to balance cost and reliability, and should not be interpreted simply as the search for lowest commodity costs. All state commissions were surveyed to assess the current status of gas planning and demand-side management and to identify significant regulatory issues faced by commissions during the next several years. The survey was to determine the extent to which they have undertaken least-cost planning for gas utilities. The survey included the following topics: (1) status of state PUC least-cost planning regulations and practices for gas utilities; (2) type and scope ofnatural gas DSM programs in effect, includeing fuel substitution; (3) economic tests and analysis methods used to evaluate DSM programs; (4) relationship between prudence reviews of gas utility purchasing practices and integrated resource planning; and (5) key regulatory issues facing gas utilities during the next five years. 34 refs., 6 figs., 10 tabs.
Date: April 1, 1991
Creator: Goldman, C.A. (Lawrence Berkeley Lab., CA (United States) National Association of Regulatory Utility Commissioners, Washington, DC (United States)) & Hopkins, M.E. (Fleming Group, Washington, DC (United States))
Partner: UNT Libraries Government Documents Department

Environmental externalities: A survey of state commission actions

Description: Awareness of the environmental consequences of electricity production have led many state public utility commissions (PUC) to consider these externalities formally in their regulation of utilities. At the request of NARUC's Energy Conservation staff subcommittee, the Lawrence Berkeley Laboratory conducted a survey to identify the extent and range of PUC approaches to this issue; responses were obtained from PUC staff in 49 states and the District of Columbia. The study should be viewed as providing a snapshot'' of regulatory developments in an area that is evolving rapidly. 16 refs.
Date: May 1, 1990
Creator: Cohen, S.D.; Eto, J.H. (National Association of Regulatory Utility Commissioners, Washington, DC (United States)); Goldman, C.A. (Lawrence Berkeley Lab., CA (United States)); Beldock, J. (USDOE Assistant Secretary for Conservation and Renewable Energy, Washington, DC (United States). Office of Buildings and Community Systems) & Crandall, G. (MSB Associates, Middleton, WI (United States))
Partner: UNT Libraries Government Documents Department