Regulatory treatment of uneconomic power plants

Abstract

A variety of factors, some intended, some not, are increasingly putting the useful economic life of electric generating units at risk. Many of these units are large baseloaded coal-fired and nuclear plants that historically have been the crown jewels of utilities' resource portfolios. Their premature retirement and abandonment is challenging state regulators and policymakers who must deal with the potentially adverse economic consequences, including ratepayer impacts. This position paper recommends the appropriate regulatory treatment (including cost recovery) of the retirement and abandonment of uneconomic power plants. It also addresses how regulators should determine whether or not any plants are indeed uneconomic on a long-term, forward-cost basis.