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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

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

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

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

Regulatory policy issues and the Clean Air Act: An interim report on the state implementation workshops

Description: The National Regulatory Research Institute (NRRI), with funding from the U.S. Environmental Protection Agency (EPA) and U.S. Department of Energy (DOE), conducted two workshops on state public utility commission implementation of the Clean Air Act Amendments of 1990 (CAAA). The first workshop was held in Charlotte, North Carolina for southern and eastern states in April 1992 and the second was held in St. Louis, Missouri for Midwestern states in May. The workshops had four objectives: (1) discuss key issues and concerns on CAAA implementation, (2) encourage a discussion among states on issues of common interest, (3) attempt to reach consensus, where possible, on some key issues, and (4) provide the workshop participants with information and materials to assist in developing rules, orders, and procedures in their state. Of primary interest from the federal perspective was for workshop participants to return to their states with additional background and understanding of how state commission actions may affect implementation of the CAAA and enable them to provide guidance to their jurisdictional utilities. It was hoped this would reduce some of the uncertainty utilities face and assist in the development of an efficient allowance market. The basic format of the workshops was that invited speakers made presentations on specific issues. {open_quotes}Primary participants{close_quotes} from each state and other workshop attendees then discussed the issues raised by the speakers and other related concerns. The primary participants were state commissioners, commission staff, representatives from state consumer advocate organizations, EPA, DOE, and the Federal Energy Regulatory Commission (FERC). Other attendees were utility representatives, consultants, and other interested parties. All participants were given a workbook with excerpts from an NRRI report on CAAA implementation and papers or outlines from speakers.
Date: August 1, 1992
Creator: Rose, K. & Burns, R.E.
Partner: UNT Libraries Government Documents Department

Electric power industry restructuring in Australia: Lessons from down-under. Occasional paper No. 20

Description: Australia`s electric power industry (EPI) is undergoing major restructuring. This restructuring includes commercialization of state-owned electric organization through privatization and through corporatization into separate governmental business units; structural unbundling of generation, transmission, retailing, and distribution; and creation of a National Electricity Market (NEM) organized as a centralized, market-based trading pool for buying and selling electricity. The principal rationales for change in the EPI were the related needs of enhancing international competitiveness, improving productivity, and lowering electric rates. Reducing public debt through privatization also played an important role. Reforms in the EPI are part of the overall economic reform package that is being implemented in Australia. Enhancing efficiency in the economy through competition is a key objective of the reforms. As the need for reform was being discussed in the early 1990s, Australia`s previous prime minister, Paul Keating, observed that {open_quotes}the engine which drives efficiency is free and open competition.{close_quotes} The optimism about the economic benefits of the full package of reforms across the different sectors of the economy, including the electricity industry, is reflected in estimated benefits of a 5.5 percent annual increase in real gross domestic product and the creation of 30,000 more jobs. The largest source of the benefits (estimated at 25 percent of total benefits) was projected to come from reform of the electricity and gas sectors.
Date: January 1, 1997
Creator: Ray, D.
Partner: UNT Libraries Government Documents Department

Research report: Summary of key state issues of FERC orders 888 and 889

Description: The Federal Energy Regulatory Commission`s (FERC) Order 888 is perhaps the most important and far reaching FERC electricity order in decades. The consequences on the structure of the industry and how the industry is regulated are significant departures from past methods and regulatory philosophy. This will undoubtedly have a dramatic impact on the manner in which state public utility commissions, which are also undergoing or considering dramatic change, regulate their jurisdictional electric utilities. This report summarizes and discusses the actions that the FERC is taking and their profound repercussions on the industry and state commissions. The report is not a comprehensive summary of the entire order. Rather, it is intended to highlight the order`s more important features and discuss what this could mean for the states. The report is organized into eight sections; the first seven address Order 888 and the last section (section 8) addresses Order 889. Section 1 through 5 summarize and discuss the main features of Order 888. Section 6 (on jurisdiction) and Section 7 (on property rights) interpret the likely consequences of the order. Section 8, summarizes the FERC`s Open Access Same Time System (OASIS) and discusses some concerns about its real-world application.
Date: January 1, 1997
Creator: Rose, K.; Burns, R.E. & Graniere, R.J.
Partner: UNT Libraries Government Documents Department

Regulatory policy issues and the Clean Air Act: Issues and papers from the state implementation workshops

Description: The National Regulatory Research Institute (NRRI), with funding from the US Environmental Protection Agency (EPA) and the US Department of Energy (DOE), conducted four regional workshops` on state public utility commission implementation of the Clean Air Act Amendments of 1990 (CAAA). The workshops had four objectives: (1) to discuss key issues and concerns on CAAA implementation, (2) to encourage a discussion among states on issues of common interests, (3) to attempt to reach consensus, where possible, on key issues, and (4) to provide the workshop participants with information and materials to assist in developing state rules, orders, and procedures. From the federal perspective, a primary goal was to ensure that workshop participants return to their states with a comprehensive background and understanding of how state commission actions may affect implementation of the CAAA and to be able to provide guidance to their jurisdictional utilities. It was hoped that this would reduce some of the uncertainty utilities face and assist in the development of an efficient allowance market. This report is divided into two main sections. In Section II, eleven principal issues are identified and discussed. These issues were chosen because they were either the most frequently discussed or they were related to the questions asked in response to the speakers` presentations. This section does not cover all the issues relevant to state implementation nor all the issues discussed at the workshops; rather, Section II is intended to provide an overview of the,planning, ratemaking, and multistate issues. Part III is a series of workshop papers presented by some of the speakers. Individual papers have been cataloged separately.
Date: July 1, 1993
Creator: Rose, K. & Burns, R.E.
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

Deregulation-restructuring: Evidence for individual industries

Description: Several studies have measured the effects of regulation on a particular industry. These studies range widely in sophistication, from simple observation (comparison) of pre-transformation and post-transformation actual industry performance to econometric analysis that attempt to separate the effects of deregulation from other factors in explaining changes in an industry`s performance. The major problem with observation studies is that they are unable to measure the effect of one particular event, such as deregulation, on an industry`s performance. For example, at the same time that the United Kingdom privatized its electric power industry, it also radically restructured the industry to encourage competition and instituted a price-cap mechanism to regulate the prices of transmission, distribution, and bundled retail services. Subsequent to these changes in 1991, real prices for most UK electricity customers have fallen. It is not certain however, which of these factors was most important or even contributed to the decline in price. In any event, one must be cautious in interpreting the results of studies that attempt to measure the effect of deregulation per se for a specific industry. This report highlights major outcomes for five industries undergoing deregulation or major regulatory and restructuring reforms. These include the natural gas, transportation, UK electric power, financial, and telecommunications industries. Particular attention was given to the historical development of events in the telecommunications industry.
Date: May 1, 1997
Creator: Costello, K.W. & 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

Determining the structure of an optimal personnel profile for a transformed commission

Description: In the classic sociological sense, an organization such as a public utility commission is a social unit consisting of specific groupings constructed and reconstructed deliberately and with forethought to achieve specific goals. These organizational groupings determined on the basis of rational divisions of labor, power, and communication are designed with the objective of placing individuals into positions where they are expected to make the largest contribution towards achieving the organization`s goals. It is reasonable then to conclude that proponents of the classical view had in mind a readily identifiable common ground among the organization`s members that the organization exploits as it selects its goals. Recently, it has been argued that metaphors are an acceptable shorthand for this common ground that provides an insight into the types of personnel an organization would find most suitable for assisting its efforts to reach its goals. This report is one of a series of reports on the transformation of public utility commissions. Previous reports in the series have focused on the transformation of a commission`s culture, roles, and activities. This report focuses on the staffing dimension of the personnel mix needed to support these changes.
Date: June 1, 1998
Creator: Graniere, R.J.
Partner: UNT Libraries Government Documents Department

Scoping calculations for groundwater transport of tritium from the Gnome Site, New Mexico

Description: Analytic solutions are employed to investigate potential groundwater transport of tritium from a radioactive tracer site near the Project Gnome site in southeastern New Mexico. The tracer test was conducted in 1963 and introduced significant quantities of radionuclides to the transmissive and laterally continuous Culebra dolomite. Groundwater in the Culebra near Gnome travels toward a regional discharge point at the Pecos River, a distance of about 10 to 15 km, depending on flow path. Groundwater transport of radionuclides from the Gnome site is therefore of interest due to the proximity of the accessible environment and the 31-year time period during which migration is likely to have occurred. The analytical stochastic solutions used incorporate the heterogeneity observed in the Culebra by treating transmissivity as a spatially correlated random field. The results indicate that significant spreading of tritium will occur in the Culebra dolomite as a result of the combination of relatively high transmissivity, high spatial variability, and high spatial correlation of transmissivity. Longitudinal spreading may cause a very small fraction of tritium mass to arrive at the Pecos River within the 31 years since the tracer test. However, dilution and transverse dispersion will act to distribute this mass over a very large volume, thereby reducing groundwater concentrations. Despite the high degree of spreading, the calculations indicate that most of the tritium remains near the source. At present, the center of mass is estimated to have moved approximately 260 m downgradient of the test location and about 95 percent of the mass is estimated to have remained within about 1 km downgradient.
Date: August 1, 1994
Creator: Pohlmann, K. & Andricevic, R.
Partner: UNT Libraries Government Documents Department