The Effects of Electricity Market Deregulation on Local Property Tax Assessments & Fiscal Stability

By Kinnard, William N., Jr.; Beron, Gail L. | Real Estate Issues, Winter 2000 | Go to article overview

The Effects of Electricity Market Deregulation on Local Property Tax Assessments & Fiscal Stability


Kinnard, William N., Jr., Beron, Gail L., Real Estate Issues


INTRODUCTION: BACKGROUND TO THE ANALYSIS

Federal Energy Policy Act of 1992

The 1992 Comprehensive National Energy Policy Act mandated restructuring the regulated electric utility industry in the United States to a competitive pricing environment. While it also encouraged energy efficiency, and the expanded use of renewable energy sources, the Act's primary thrust was to require competition (most especially competitive pricing) in the electricity generation segment of the electric utility industry. This meant competitive pricing of wholesale electricity at the generating plant "gate." The traditional vertical integration of the generation-production, transmission and distribution functions within the electric utility industry was effectively dismantled. Wholesale price competition was to be achieved through ownership-operation of generating facilities by non-regulated, non-utility owner-operators.

The transmission function, on the other hand, was required to remain under regulation by both the Federal Energy Regulatory Commission (FERC) and state regulatory commissions. Subsequent to the passage of the Act, FERC has mandated equal access to the transmission network, for all generating facilities, and at the same fees. The distribution function also remains with existing regulated local utility companies, who must deliver electricity to customers of all power suppliers within their former franchise areas at the same fees and with equal access.

From the base of the initial requirements and specifications of the Act, individual states were encouraged to pass their own restructuring legislation. In the absence of any such state legislation, federal standards and requirements were to go into effect by 2002.

State Action

Since 1997, several major states have passed legislation that both created a timetable for the development of a competitive pricing system for electricity and mandated choice of electricity providers for non-residential and residential customers alike. Approximately a dozen states in New England, the Middle Atlantic Region, and the Upper Mid-West (plus California) have such programs in place or in process. In most instances, non-residential ("commercial") customers were given the option to choose electricity providers or sources before such choice was offered to residential consumers.

Nearly all the state legislative programs require divestiture of generating facilities by regulated investor-owned utilities (IOUs), or at least "encourage" it. Municipal utility companies, other governmentally-operated utilities, and electric cooperatives are generally exempt from this divestiture requirement. Shifting ownership and operation of generating plants to non-regulated firms means that a market-price basis for local assessment and taxation of power stations must replace the existing system of relying primarily on net book value. The market evidence from the first two years of divestiture to non-IOUs indicates changes in plant values that will likely have strong impacts on both the local revenues and fiscal policies.

EMERGENCE OF A MARKET FOR GENERATING PLANTS

Because of the mandate or "encouragement" of divestiture in state "deregulation" laws, a reasonably active market for generating plants has developed since late 1997. The first sales were in California, which set the pattern for most of the other transactions that have occurred subsequently. Divestiture of generating plants is accomplished through public auction, most commonly with sealed bids. After bids are submitted and reviewed, there is usually direct negotiation between the seller and the short list of "acceptable" bidders.

Figure 1 presents summary information about sales volumes and prices through October 1999. The 55 reported sales transactions included over 200 generating plants. Multiple-plant transactions are not uncommon. At the same time, it is unusual for one purchaser to acquire the entire generating plant capacity of an IOU.

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 ...
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

The Effects of Electricity Market Deregulation on Local Property Tax Assessments & Fiscal Stability
Settings

Settings

Typeface
Text size Smaller Larger
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.