7 PPT_Electricity

7 PPT_Electricity - California Electricity Crisis I....

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California Electricity Crisis
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I. Background CA began serious consideration of restructuring electricity market in 1994 because CA paid higher electricity prices than most other states. Reasons: - Investment and procurement mistakes of investor-owned utilities (IOUs) and the CA PUC during previous 20 years were passed on in rates. -N u c l e a r p o w e r p l a n t s w e re far more expensive than expected - They signed long-term contracts with small generators that committed them to very high whole sale prices (Note: these were sunk costs) Also, electricity deregulation in the UK was very successful. Thought it would work for CA.
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II. Nature of Restructuring bill passed in 1996 A. Permitted IOUs full recovery of bad investments (“stranded costs”). To do so, it fixed retail price at 6 cents per kilowatt hour (kwh). It thought that wholesale price would be below 6 cents, so difference would help IOUs recover stranded costs. When all costs were recovered for an IOU , its retail rates would be deregulated.
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7 PPT_Electricity - California Electricity Crisis I....

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