Assessing Transition-Cost Strategies: A Case Study

  • Lester Baxter
  • Stanton Hadley
  • Eric Hirst


Restructuring the US electricity industry has become the nation's central energy issue for the 1990s. Restructuring proposals focus on more competitive market structures for generation and the integration of transmission within those structures. The proposed move to more competitive generation markets will expose utility costs that are above those experienced by alternative suppliers. Debate about these above-market, or transition, costs (e.g., their size, who will pay for them and how) has played a prominent role in restructuring proceedings. This paper presents results from a project to assess systematically strategies to address transition costs that will be exposed by restructuring the electricity industry.