Competing for multiple electric markets

✍ Scribed by Smith, William H.

• Publisher: John Wiley and Sons
• Year: 2007
• Weight: 325 KB
• Volume: 12
• Category: Article
• ISSN: 0743-5665
• DOI: 10.1002/gas.3410120309

✦ Synopsis

For the natural gas industry to increase its sales to the electricity industry's customers, it will help to have a better understanding of the forces working in that market. The electricity industry's ground rules are changing rapidly, bringing competition on the supply side, more choices on the customer side, and more open access to the transmission system linking them.

How electricity generators make choices from this menu depends on differences in construction cost, operating cost, and other factors. The cost factors are weighted quite differently for different kinds of decisions, and sellers should understand these differences.

Perhaps even more than the natural gas industry, electricity system planning operates in a distant future time zone, while its operating decisions are driven by short-term, almost instantaneous, factors. Electric system planning tries to anticipate service needs two, three, and four decades ahead. Facilities are constructed with that kind of durability. Under traditional regulation, capital recovery could extend over those long equipment life spans. Operating decisions, on the other hand, are dictated by seasonal, daily, and moment-to-moment changes in usage on the home system, as well as conditions on other systems through a large region of North America.

These differences in time frames carry over into regulatory decisions. The long lead time on generation planning and decisions gives plenty of time for regulators to review decisions and shape them. The Federal Power Act reserves William H. Smith Jr. is chief of the Bureau of Rate and Safety Evaluation for the Iowa Utilities Board and directs the Board's FERC participation.