3332 -- The Electric Utilities are Shifting Risk to Their Customers: A New Reason for Investing in Conservation PDF

Electricity producers in the USA, who have suffered from capital risks incurred in recent years, are shifting some future risks to their customers. Utilities are reducing the level of investment in capital-intensive generation technologies such as coal and nuclear response to decreasing gas and oil prices, high real interest rates, cost overruns, regulatory scrutiny, and the changing structure of power markets. There is evidence of a strategic shift in favour of lower-capital-cost, gas- or oil-dependent options such as combustion turbine combined cycle technology, as well as purchased power. This reduces the financial risks for utilities while increasing the sensitivity of electricity price to variations in oil and gas costs. Customers therefore assume increased risk in the form of potentially volatile electricity prices. This suggests that electricity consumer should consider making investments of their own in conservation and other forms of risk management.

KEYWORDS: electricity production, utilities, energy conservation, costs, electricity consumption, USA.