Date of Award
Doctor of Philosophy (PhD)
Management (Business Administration)
Dan B. Rinks
The electric utility industry in the United States is currently experiencing a new and different type of growing pain. It is the pain of having to restructure itself into a competitive business. Many industry experts are trying to explain how the nation as a whole, as well as individual states, will implement restructuring and handle its numerous "transition problems.". One significant transition problem for federal and state regulators rests with determining a utility's stranded costs. Stranded generation facilities are assets which would be uneconomic in a competitive environment or costs for assets whose regulated book value is greater than market value. At issue is the methodology which will be used to estimate stranded costs. The two primary methods are known as "Top-Down" and "Bottom-Up." The "Top-Down" approach simply determines the present value of the losses in revenue as the market price for electricity changes over a period of time into the future. The problem with this approach is that it does not take into account technical issues associated with the generation and wheeling of electricity. The "Bottom-Up" approach computes the present value of specific strandable generation facilities and compares the resulting valuations with their historical costs. It is regarded as a detailed and difficult, but more precise, approach to identifying stranded assets and their associated costs. This dissertation develops a "Bottom-Up" quantitative, optimization-based approach to electric power wheeling within the state of Louisiana. It optimally evaluates all production capabilities and coordinates the movement of bulk power through transmission interconnections of competing companies in and around the state. Sensitivity analysis to this approach is performed by varying seasonal consumer demand, electric power imports, and transmission inter-connection cost parameters. Generation facility economic dispatch and transmission interconnection bulk power transfers, specific to each set of parameters, lead to the identification of stranded generation facilities. Stranded costs of non-dispatched and uneconomically dispatched generation facilities can then be estimated to indicate, arguably, the largest portion of restructuring transition costs as the industry is transformed from its present monopolistic structure to a competitive one.
Cope, Robert Frank III, "A Methodology to Identify Stranded Generation Facilities and Estimate Stranded Costs for Louisiana's Electric Utility Industry." (1998). LSU Historical Dissertations and Theses. 6777.