The Changing Structure of the Electric Power Industry 2000: An ... - EIA

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Figures (Continued) Page 8. Electric Control Area Operators � Continental United States, 1998. ................................. 15 9. Service Areas for Investor-Owned Utilities, 1998 ................................................ 20 10. Service Areas of Federal Utilities, 1998 ......................................................... 20 11. Publicly Owned Utilities in the United States, 1998 ............................................... 21 12. Service Areas of Cooperative Utilities, 1998 ..................................................... 21 13. Shares of Nonutility Nameplate Capacity by Major Industry Group, 1998 ............................ 23 14. Share of Utility and Nonutility Nameplate Capacity, Net Generation, Additions to Capacity, and Number of Units by Ownership Category, 1998 ......................................................... 24 15. Total Utility and Nonutility Nameplate Capacity, Net Generation, Additions to Capacity, and Number of Units by Ownership Category, 1992-1998 ..................................................... 25 16. Annual Growth Rate of Utility and Nonutility Nameplate Capacity, Net Generation, Additions to Capacity, and Number of Companies, 1992-1998 ................................................. 26 17. Electric Utility Wholesale Power Purchases by Ownership Type, 1998 ............................... 27 18. U.S. International Electricity Trade, 1985-1998 ................................................... 27 19. Sales to Ultimate Consumers by Sector, 1992 and 1998 ............................................ 27 20. Share of Sales to Ultimate Consumers by Sector, 1992 and 1998 .................................... 28 21. Sales to Ultimate Consumers by Class of Ownership, 1992 and 1998 ................................ 28 22. Share of Sales to Ultimate Consumers by Class of Ownership, 1992 and 1998 ......................... 28 23. Status of State Electric Utility Deregulation Activity, as of July 2000 ................................. 42 24. Average Revenue per Kilowatthour for All Sectors by State, 1998 ................................... 43 25. Average Revenue per Kilowatthour for the Industrial Sector by State, 1998 ........................... 44 26. Relative Average Revenue of Electricity Sales: Ratio of Industrial Consumers to All Consumers, 1960-1998 ................................................................................. 44 27. Independent System Operators and Regional Transmission Organizations in Operation or Under Discussion as of April 1, 2000 ................................................................ 75 28. Major Wholesale Electricity Trading Hubs and Centralized Power Markets .......................... 79 29. Concentration of Ownership of Investor-Owned Utility Generating Capacity, 1992 and 2000 ............ 98 30. Cumulative Electricity Generation Capacity Additions Through 2020 .............................. 103 31. Investor-Owned Electric Utility Generation Capacity Divested or to be Divested by Census Division, as of April 2000 ........................................................................... 107 Energy Information Administration/ The Changing Structure of the Electric Power Industry 2000: An Update vii
The U.S. electric power industry, the last major regulated energy industry in the United States, is changing to be more competitive. In some States, retail electricity customers can now choose their electricity company. New wholesale electricity trading markets, which were previously nonexistent, are now operating in many regions of the country. The number of independent power producers and power marketers competing in these new retail and wholesale power markets has increased substantially over the past few years. To better support a competitive industry, the power transmission system is being reorganized from a balkanized system with many transmission system operators, to one where only a few organizations operate the system. However, the introduction of these new markets has been far from seamless. California, where retail competition was introduced in 1998, has had problems recently. Electricity prices in some parts of the State have tripled and there have been supply problems as well. Although not as severe as California, New York’s electricity market has had price spikes which may be attributable to problems in the market design. While some observers argue that deregulation should be scrapped, others argue that deregulation is a noble endeavor and that these problems can be solved with structural adjustments to the markets. This reorganization is actually the second major structural realignment in the history of the industry. The first occurred during the late 1920s and early 1930s. However, the changes then were mandated by a Federal law that was designed to stop holding company misconduct. Today, the changes that are occurring are not driven by misconduct, but rather by economic and technological factors. In fact, three primary catalysts are driving the current movement toward a restructured electric power industry. First is a general reevaluation of regulated industries and a rethinking of how the introduction of competition might improve efficiencies. The telecommunications and banking industries have been made more competitive, and the electric power industry is being evaluated for similar efficiency gain potential. The second factor driving the restructuring debate is the wide disparity of electricity rates across the United States (Figure ES1). In 1998, consumers in New York paid more than two and one-half times the rates Executive Summary that consumers in Kentucky paid for their electricity. In the western United States, the rates paid by consumers in California were well over twice the rates paid by consumers in Washington. Technological improvements in gas turbines have changed the economics of power production. No longer is it necessary to build a 1,000megawatt generating plant to exploit economies of scale. Combined-cycle gas turbines reach maximum efficiency at 400 megawatts, while aero-derivative gas turbines can be efficient at scales as small as 10 megawatts. These improvements, involving less capital investment and less time to build capacity, are the third set of catalysts driving restructuring. Because it provides the capability to move power over long distances, the transmission system is an integral component of the Nation’s electric power industry. Through regulatory reform, the Federal Energy Regulatory Commission (FERC) has promoted the development of competitive wholesale power markets and opening the transmission system to all qualified users. Since the late 1980s, FERC has approved more than 850 applications to sell power competitively in wholesale markets. In arguably its most ambitious effort to date, in December 1999, FERC issued Order 2000 calling for electric utilities to form regional transmission organizations (RTOs) that will operate, control, and possibly own the Nation’s power transmission system. The potential benefits of RTOs are the elimination of discriminatory behavior in using the transmission system, improved operating efficiency, and increased reliability of the power system. A number of States have played an active role in promoting retail competition in the electric power industry. Relatively high-cost States have been in the forefront of enacting legislation or making rules to allow retail competition. California and the northeastern States were the first to allow retail competition and encourage consumers to shop for their power suppliers. Other States such as Kentucky and Idaho, whose rates are among the lowest in the country, are not moving as quickly. A recent report issued by Kentucky’s Special Task Force on Electricity Restructuring found no compelling reason for Kentucky to move quickly to restructure its electric power industry. As of July 1, 2000, Energy Information Administration/ The Changing Structure of the Electric Power Industry 2000: An Update ix
Page 1 and 2: DOE/EIA-0562(00) Distribution Categ
Page 3 and 4: Section 205(a)(2) of the Department
Page 5: Contents (Continued) Page Appendice
Page 9 and 10: Figure ES2. Status of State Electri
Page 11 and 12: egulation coexist. Chapter 2 presen
Page 13 and 14: 2. Historical Overview of the Elect
Page 15 and 16: Table 1. Percentage Change Between
Page 17 and 18: Generation of electricity 3. The U.
Page 19 and 20: Figure 3. Prime Movers of Electrici
Page 21 and 22: California’s tight restrictions o
Page 23 and 24: follow the directions of NERC. The
Page 25 and 26: Table 2. Major Characteristics of U
Page 27 and 28: Table 4. Energy Supply Participants
Page 29 and 30: from other utilities and market lar
Page 31 and 32: Figure 13. Shares of Nonutility Nam
Page 33 and 34: Figure 15. Total Utility and Nonuti
Page 35 and 36: Figure 17. Electric Utility Wholesa
Page 37 and 38: 33 PUHCA and PURPA are now being ta
Page 39 and 40: (2) such holding company is predomi
Page 41 and 42: a new avoided cost for purchased po
Page 43 and 44: Major Federal Legislation Affecting
Page 45 and 46: a SEPA markets power in West Virgin
Page 47 and 48: Part II: The U.S. Electric Power In
Page 49 and 50: Figure 23. Status of State Electric
Page 51 and 52: Figure 25. Average Revenue per Kilo
Page 53 and 54: 6. Federal Legislative Initiatives
Page 55 and 56: for establishing the reliability st
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Those who are against outright repe
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The Comprehensive Electricity Compe
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Table 8. Proposed Legislation Influ
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62 Table 9. Overview of the Federal
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on the same basis and under the sam
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and a half. 86 The overwhelming maj
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transmission system, and achieve fu
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70 Table 12. Summary of Major Provi
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72 Table 12. Summary of Major Provi
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company (Transco) model. With the I
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Table 13. Selected Information on I
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78 � Recently, � In FERC accept
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approved more than 850 applications
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up, and, at the same time, deregula
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is publicly available. The PX then
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companies were required to report t
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price that each utility pays for su
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Kentucky In December 1999, Kentucky
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92 Energy Information Administratio
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Figure 29. Concentration of Ownersh
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100 Energy Information Administrati
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Table 17. Overview of Strategic Ben
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Table 18. Government Agencies Respo
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competition. Some States have passe
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expected as some of the pending mer
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Appendix A History of the U.S. Elec
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areas and towns with populations un
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New technology introduced during th
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From 1980 through 1984, net electri
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Appendix C Pending Federal Restruct
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� Establishes a fund within the D
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mation and that prohibit discrimina
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dioxide, mercury, and sulfate fine
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H.R. 2944 Electricity Competition a
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� Prescribes specifics regarding
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if conflict arises. Authorizes TVA
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� Directs the Department of Energ
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Appendix D Electric Power Industry
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on a number of subject areas, inclu
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Table D1. Electric Power Industry S
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