Peter Fox-Penner

Regulating independent power producers : lessons of the PURPA approach

Abstract The Public Utility Regulatory Policies Act of 1978 (PURPA) enabled private, unregulated power generators to sell electricity to electric utilities. PURPA required states to adopt somewhat flexible implementation policies with the uniform objective of facilitating sales between private producers and utilities. In contrast to many published anecdotal accounts of PURPAs impact, this research constructs a model of cogeneration investment as a function of state prices and state PURPA regulations. Tests of the model using data from around 1985 indicate that interstate regulatory differences have significant and sometimes counterintuitive impacts on private generation. Electricity and fuel prices significantly affect the amount of private capacity installed, but regulatory effects dominate the decision to invest or not to invest.

Due diligence and the demand for electricity: A cautionary tale

In 1983, the Washington Public Power Supply System (WPPSS) defaulted on tax-free revenue bonds issued to construct two of its five nuclear power plants. In subsequent litigation, the plaintiffs alleged that the bonds had been fraudulently issued because WPPSS and the other defendants should reasonably have known and disclosed that there was “substantial uncertainty” about the ability to meet the financial obligations created by the bonds. A model using plausible values for demand elasticities, recognized probabilities of events that would increase costs and delay construction and data used by WPPSS to construct demand forecasts for prospective bondholders suggests that such uncertainty was present at the time the bonds were issued. The values for demand elasticities and other parameters of the model were selected after a thorough review of the econometric literature on demand for electricity, beginning with the work of Fisher and Kaysen in 1962.

Easing Gridlock on the Grid, , : Electricity Planning and Siting Compacts

Abstract State and local siting processes that approve transmission facilities should be combined into a single regional approval process, an electric planning and siting commission, that is controlled by the states and allows one-stop shopping for regional facility approvals.

Price-Responsive Electric Demand

California’s electricity crisis has ignited a national debate over electricity deregulation and national energy policy. Thousands of words have been written on the role of transmission limitations, load growth, generation ownership, abnormal weather, poor market design, insufficient supply, and shortage of gas, and all of these factors are important. But one of the most important lessons emerging from this calamity clearly is a long-overdue realization that policymakers can no longer ignore the need to make electricity demand responsive to price. Without this critical ingredient, electricity markets will never function properly, electricity costs will be billions of dollars more than necessary, and a new generation of energy-saving technologies will sit on the shelf. Moreover, price-responsive demand can provide relief from the worst electricity price spikes at least as quickly as new plants can be built, with lower costs and environmental impacts.1

In What Shape Is Your ISO

Abstract ISOs are now seen as fundamental to the development of competitive electricity markets. However, not all ISOs are equally capable of facilitating competitive markets efficiently and reliably. ISOs having a size and shape that poorly coincide with regional markets may not facilitate competition and may even hinder it.

A proposal for design-based auto industry environmental regulation

As the U.S. auto industry tries to remain competitive in the face of evolving environmental rules, the new administration is presented with the opportunity to achieve environmental and economic goals through an industry-government partnership. The authors suggest a policy of total environmental quality as a starting point.

The private DSM industry: A gleam in whose eye?

Todays energy efficiency industry can trace its ancestry to the heady, turbulent 1970s, though perhaps we should remember that the 1970s were followed by a period in which much of what was adopted was dismantled, and much of what was advocated was forgotten. The Demand Side Management an industry that was a backwater 20 years ago now has two professional associations, each with membership approaching 1,000, and annual estimated revenues in the hundreds of millions of dollars. It is a uniquely American embodiment of the notion that a competitive industry, working hand-in-hand with regulated utilities, can sell energy efficiency. While this success is admirable from virtually every standpoint, it has been the product of a number of twists and turns in energy economics and policy. This article examines the extent to which the DSM industry owes its success to current fashion among regulators and politicians financial incentives to participate, DSM project financing, competition for DSM services, and documenting success of DSM.