STRATEGIES TO ADDRESS TRANSITION COSTS IN A RESTRUCTURING ELECTRICITYINDUSTRY

This paper discusses the potential financial consequences, or transiti on costs, of transforming electricity generation from a regulated to a competitive market in the US, Industry-wide estimates suggest potenti al monetary losses could exceed $100 billion as a result of the move t o competition, The paper discusses the most prominent strategies sugge sted to address these potential losses. For each strategy, the paper i dentifies the parties most likely to bear the financial consequences. Most strategies do nothing to reduce the total costs to society, but i nstead shift costs from one set of economic actors to another. The exc eptions are those strategies that result in economic-efficiency gains, which can then be used to offset the transition costs, Most of the st rategies examined require the cooperation of several parties, includin g regulators, to be implemented successfully. (C) 1997 Published by El sevier Science Ltd.