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COMPETITIVE ALTERNATIVE TO RETAIL WHEELING

Worldwatch predicts that new technology will change the power industry. Micro generators may eventually have the same impact on the generating industry as the change from a few mainframes to several thousand personal computers in the computing business. The report outlines alternatives to retail wheeling.

New technologies and a more competitive market will severely shake up America's $800-billion-a-year electric power industry in the next few years, reports Worldwatch Institute. Some of today's large debt-burdened utilities may break up, and many high-cost nuclear and coal plants may shut down, according to the findings of Christopher Flavin and Nicholas Lenssen, authors of Powering the Future: Blueprint for a Sustainable Electricity Industry, recently published by the institute.

Smaller energy service firms, independent power producers and locally based utilities may overtake traditional energy brokers, they say. New technologies such as wind and "micro" generators are also on the way, the latter being similar to a corporation switching from three mainframe computers in 1980 to 30,000 personal computers by 1994, it continues. Modern telecommunications will make it easier to inter-connect the new mass produced micro generators by two-way coaxial cables or fibre optic lines so that the grid operates as a single smart system, it says. And a market in saved energy is opening up, with the US utility industry investing $2.8 billion in investment in 1993.

Retail wheeling (Windpower Monthly, May 1994), however, would only partially provide the benefits of increased competition while severely undermining the long term planning so vital to an efficient, environmentally sound power market, states the report. Retail wheeling could allow the largest customers to avoid paying for fixed utility costs, which then fall onto the shoulders of retail customers as has happened in Great Britain and Norway, claim the authors. They note that in the US the Dow Jones Utilities index plummeted 27% between September 1993 and June 1994, representing $70 million in book losses to utilities, it says.

Instead of retail wheeling Worldwatch suggests a two-tiered approach whereby an open competitive market with environmental costs figured in is set up for the wholesale level, and at the distribution level a competitive market in electricity services would be more effective. Distribution utilities would offer customers not only electricity but also energy-saving devices and would be rewarded by regulators for doing that job well -- committing the industry to long term planning and an environmentally sustainable power system.

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