Taking a Close Look at the Evolving Utilities Industry: Factors that Drive Volatility and Methods to Help Manage It

Abstract

The electric industry has undergone a radical transformation over the last five years. Prior to the late 1990s, the industry was heavily regulated. Investor-owned utility companies operated in franchise areas, under an agreement with local regulators that no competitors would be allowed, in exchange for the utility to pass through all prudently incurred costs of serving its customers as well as an allowed rate of return for required capital investments. This system worked reasonably well for decades.