Restructuring Roundtable: Merchant vs Rate-Base. presented by Dan Allegretti. The Basic Idea. Merchant = Gooood!!!! Rate Base = Baaaad!!!!. Benefits of Moving to Merchant Model. Three Main Benefits Competitive forces lead to more efficient operation
Three Main Benefits
Utility-owned power plant
Merchant power plant
Source: “A Review of Electricity Industry Restructuring in New England,”
Polestar Communications and Strategic Analysis (for the New England Energy Alliance), September 2006.
Example: Duke Energy
“U.S. power company Duke Energy on Thursday significantly boosted its estimated cost for building two proposed power plants, citing higher material expenses and a shortage of skilled labor. Chief Executive Jim Rogers said at a press luncheon that the proposed clean-coal power plant in Indiana may cost $2 billion, up from a prior estimate of about $1 billion. The cost for the proposed conventional coal plant in the Carolinas has been increased to $3 billion from $2 billion, Rogers said.”
*Source: Reuters, November 16, 2006.