Distributed Power Opportunities For Investor-Owned Utilities Cogeneration Can Play A Major Role

Abstract

The In v estor Own ed Utility (IO U) industry is on th e ver ge of
going through ma ssiv e chan ge. Deregul ati on of electr icity ma y cha nge
th e face of elect ric supplies in the sam e way that der egulati on of
tran sportation chan ged th e face of th e rail indus t ry.
In 1979 the rail industry was mad e up of severa l hundr ed small
railroads serving sp ecific markets with r egulat ed rates . Since der egu-
lation th e industry has consolidated to six major railroad s, thr ee in
th e eas t a nd thr ee in the we st . This consolidation ma y continu e until
th ere ar e thr ee railr oads which serve from east to we st .
Today 's utilit y industry consists of approximat ely 300 locally
r egulat ed c ompani es who pr ovide elect ricity int o franchi sed ar eas at
r egulat ed rate s. Th e rat e structur e is based on a bott om up pricing
form at which all ows profit to be ba sed on cost s. Thi s is si mila r to
purcha sin g an aut omobil e by going to y our local NAPA deal er and
startin g w ith th e purcha se of a batt er y, four tir es with rim s , an ex-
h au st pipe, etc. To all of thi s a profit margin is add ed a nd th e price is
es t ablishe d.
D er egulati on m eans supply and dem and pricing wh er e th e low-
es t cost suppliers will command th e mo st customer s. As th e IO Us
wa ke up to thi s pr oces s, th ey will need to r e-think th eir gen eration
and di stribution decisions to cre ate a far more efficient s yst em .