Restructuring of the Electric Utilities Industry: An Overview for Government Finance Officials

By Rutledge, Virginia B. | Government Finance Review, February 1997 | Go to article overview

Restructuring of the Electric Utilities Industry: An Overview for Government Finance Officials


Rutledge, Virginia B., Government Finance Review


The emergence of a competitive and less regulated electric power generation and delivery system will raise an array of finance issues for state and local governments.

Three articles comprise this briefing on the fundamental changes occurring in the electric power industry and what the future may hold for electric power companies and, more importantly, the prices and services they provide to the ultimate customers. A background discussion of the players and the playing field provided by the Missouri Basin Municipal Power Agency highlights recent developments in deregulation of the industry and the emergence of retail competition in the distribution and sale of electricity. Competition means consumers shopping the market for retail service. What assurance of uninterrupted service and equitable rates will consumers have in a deregulated electric power marketplace? These and other questions are addressed in the second article, which presents excerpts from a June 1996 report of the American Public Power Association's (APPA) Retail Wheeling Legislative Task Force. Identifying the implications of some of these issues for state and local government finance is the focus of the third article - a commentary by a former president of the Government Finance Officers Association, Virginia Rutledge, who is vice president and chief financial officer of the Orlando Utilities Commission. The editors are indebted to Lori Pickford of APPA for her assistance in developing this briefing.

Current Structure and Trends in the Electric Utility Industry

Missouri Basin Municipal Power Agency

The utility industry is comprised of three basic functions: power generation, high voltage transmission, and retail distribution. Generation is the process of actually creating electricity through such means as coal-fired, gas-fired, hydroelectric, and nuclear power plants. Transmission refers to the network created to move electricity across large distances through high-voltage lines. The distribution system is the set of lower voltage lines that moves power off the transmission system and to the end users. Many electric utilities are vertically integrated, with a single company performing all three functions. While utilities may provide each of these services separately, its core business - providing electricity to retail consumers - bundles all three functions into a delivered service.

Historically, the power-generation sector was characterized by economies of scale - power plants were cheaper to build, per unit, as the size of the plant increased. While power generation was not a monopoly function, these economies of scale and associated capital requirements effectively limited the number of market participants.

High-voltage transmission facilities are a natural monopoly - it is not economic nor socially desirable to construct multiple transmission systems (and not allowed under applicable Missouri law). These transmission facilities are owned principally by large, vertically integrated utilities.

Retail distribution service - the physical delivery of electricity to end-use consumers over low-voltage lines - also is considered a natural monopoly, with a single utility providing retail service in a given geographic region. There are limited cases in which two competing distribution systems exist. The retail distribution market is composed of three types of utilities.

* Investor-owned utilities (or private utilities) are usually part of a vertically integrated company and receive a franchise to serve a specific geographic market for a set period of time. There are 249 investor-owned utilities, serving approximately 75 percent of retail electric consumers.

* Rural electric cooperatives (or co-ops) operate as private, nonprofit membership corporations. There are 937 co-ops, serving about 10 percent of the retail electric market.

* Public power systems are utilities owned and operated by municipalities and other units of state and local government. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Restructuring of the Electric Utilities Industry: An Overview for Government Finance Officials
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.