One cause of skyrocketing electricity rates is the construction of more power plants than are needed to supply current demand. Public utility commissions are faced with the difficult question of who should pay for this "excess capacity"-the utility companies, through their investors, or the consumers, as ratepayers. This Article argues that consumers should not pay the entire cost of excess capacity. The Article begins by analyzing the two historic responses to the problem, the "prudent management" and the "used and useful" theories. The Article then examines the contemporary responses to the excess capacity problem, which add the "shared risk" theory to the two traditional theories. The Article criticizes the prudent-management approach as inadequate, and advocates the use of either the used-and-useful or shared-risk approaches. The Article concludes with a discussion of how to allocate excess capacity costs between utility company investors and consumers under both of the advocated approaches, thereby reaching the most equitable result for the parties involved.
Roger D. Colton,
Excess Capacity: Who Gets the Charge from the Power Plant,
34 Hastings L.J. 1133
Available at: https://repository.uchastings.edu/hastings_law_journal/vol34/iss5/5