Utility Asset Research Articles

Preparing for Financial Restructuring in the Electric Utility Industry

Th e der egu latio n of th e electric utility indus try ha s been wellpublicized and mu ch discussed b oth insi de and outsi de the ind ustry.This d er egulation pr oduces the pr ospect of un cert ai nty in a n indus -try th at has known some level of ce rtai nty t h ro ugh t he "r a t e ofr eturn " st a nda rds imp osed by regulators to set ra tes, a nd there bysupport rev enues . Accordingly, the historical concept of "used an duseful" will no longer be th e det ermini ng facto r in calculating return.Thi s change may produce economic dislocation given the capitalint en sit y within th e elect ric utility in dustry. The Federal EnergyRegu lat ory Commi ssi on ("FERC") has clea rly indicate d that it in-ten ds to cr eat e a comp etitive market place for electric power. It willaccomplish this by a llowing any generatio n source "open access" totr an smi ssion lin es th at have been previously controlled by vertically-int egr at ed utilities .As a result, certain as sets , such as dist ribu ti on assets a nd someportion of t rans mission assets, will cont i nu e to be r ate of re turn regu -lat ed ; however, the re maining electric ut ility assets will most likelybe s ubj ect to compet itive ma r ket r eturn s.

Substation based data interpretation techniques for improved power system management

There is now considerable pressure on electric utilities to operate their power systems in the most efficient manner possible and to provide increased quality of service to customers. This pressure, coupled with the decreasing availability of reserve margins, dictates that there is a requirement for comprehensive power system operation support through, among other things, the provision of quality information relating to the behaviour of the primary and secondary systems. This paper shows how the data available within modern substation control and management systems can be exploited in a cost-effective manner, through the implementation of advanced substation functions in an open systems environment. Certain functions which are presently carried out at the control centre could be distributed (or partially distributed) to the substation. These functions may provide utility staff with quality information, which can in turn be used to satisfy the objectives of increasing quality and security of supply, in addition to optimising the utility's information, maintenance and asset management functions.

Reliability centered maintenance for transmission systems

The regulatory and market forces that are challenging the electric utility industry require more proactive methods of utility asset management. An important component of asset management for electric utilities is the maintenance of existing power transmission lines. Therefore, some utilities are working to implement a condition-based, predictive transmission line maintenance program using the concepts of reliability centered maintenance.

THE USE OF GIS IN A MAJOR WATER UTILITY COMPANY.

Keywords ANGLIAN WATER GIS, GEOGRAPHIC, INFORMATION, SYSTEMS, USE, WATER, COMPANIES, UTILITIES, BUSINESS, FIRMS, MANAGEMENT, INTEGRATION, TOOLS, ASSETS, NETWORKS, TECHNOLOGY, COMPUTERS... Show All

The economics of stranded investment—a two-way street

In the transition to deregulation, the risk, costs and benefits of utility assets are transferred from the customer to the investor, creating potential stranded benefits as well as stranded costs. Investors may be better or worse off depending on whether an asset's cost is below or above market. Regulators can minimize unintended wealth transfers by compensating each potential loser in the transition.

Restructuring the electric utility industry: Further tentative thoughts

To ready the industry for full competition, here are proposals for sharing stranded costs, ending the Poolco vs. Noco impasse, revaluing utility assets and ending their obligation to serve roving customers. The time is now.

Achieving competitive advantage in the electric power marketplace

A competitive repositioning of the utility asset base will require utilities to consider how their existing generation and transmission assets can be managed and operated in new and different ways to provide meaningful and durable benefits relative to the competition.

The Role of Asset Management

ABSTRACTThe paper describes the role of asset management in the UK water industry. An asset management plan is directed to capital works and other expenditure associated with maintaining the condition and performance of the utility's assets. The six parts of an asset management plan are described, together with an outline of the broad considerations necessary in the preparation of such a plan. This leads to a description of the role of asset management and a consideration of the impact on the utility organization.It is concluded that asset management planning provides an effective method of determining long‐term investment needs and is of major benefit in the day‐to‐day management of a utility.

ELECTRIC POWER DEREGULATION: BACKGROUND AND PROSPECTS

The incentive failures of rate‐of‐return regulation are well known and thus raise the question of whether to deregulate electric power. The development of long‐distance transmission and of alternative power sources in networks has spawned several institutions that would or could allow markets to substitute for such regulation. These include long‐term contract sales, spot power exchange, contract power pooling, shared facility ownership, and economic dispatch. Because of the current surplus of power, the existence of such institutions has caused increasing competition in the electric power market and has catalyzed the movement to deregulate generators from state authority and to restructure utility assets. By encouraging this movement, regulators can further the discipline that markets already exert on prices and costs. By making counterproposals to the utilities, regulators can influence asset restructuring so that some of the capital gains inherent in such restructuring can be shared with consumers in the form of rate relief. Finally, for the future, the cotenancy agreement—which is antitrust supervised and competitively ruled—has promising possibilities for deregulating transmission and distribution.

Admissible Rate Bases, Fair Rates of Return and the Structure of Regulation

A CENTRAL QUESTION in the theory of regulation is what constitutes a fair return on a utility's assets. The current legal answer is that provided by the Supreme Court in its Hope Natural Gas decision. A fair return should be commensurate with returns on investment in other enterprises having corresponding risk (the comparable return standard) and sufficient to attract capitall (the capital attraction standard). Unfortunately, in practice these guidelines are ambiguous and, as a result, are not uniformly applied. In one sense, they are definitional. There is an emerging consensus that a fair percentage rate of return should equal a utility's market determined cost of capital.2 However, the Hope Decision did not specify how the value of a utility's assets, to which the fair percentage return could be applied, was to be calculated. This paper

INTERDEPENDENCE OF UTILITY RATE‐BASE TYPE, PERMITTED RATE OF RETURN, AND UTILITY EARNINGS*

As IS WELL KNOWN, regulatory agencies determine the dollar earnings of public utilities by fixing in rate decisions the rate base of the utilities and the rate of return that the utilities can earn on that rate base. Some regulatory agencies use original cost as their criterion in determining the rate base, others use reproduction cost as their criterion, and still others use a which for purposes of this paper will be called fair value, somewhere between original cost and reproduction cost as their criterion.1 Since the reproduction cost of public utility assets has exceeded the original cost of these assets during the postwar period of increasing factor prices, the question naturally emerges of whether agencies using the original-cost ratebase criterion have tended to compensate for the lower rate base by allowing higher rates of return. This paper suggests an answer to this question, at least for the 15 Bell operating telephone companies in the country which operate within a single regulatory jurisdiction.2 The first part of the paper shows that in the case of these 15 telephone companies, those in original-cost rate-base jurisdictions have been permitted the highest rates of return on their rate bases and those in reproduction-cost jurisdictions have been permitted the