Strategies to address transition costs in a restructuring electricity industry

This paper discusses the potential financial consequences, or transition costs, of transforming electricity generation from a regulated to a competitive market in the US, Industry-wide estimates suggest potential monetary losses could exceed $100 billion as a result of the move to competition, The paper discusses the most prominent strategies suggested to address these potential losses. For each strategy, the paper identifies the parties most likely to bear the financial consequences. Most strategies do nothing to reduce the total costs to society, but instead shift costs from one set of economic actors to another. The exceptions are those strategies that result in economic-efficiency gains, which can then be used to offset the transition costs, Most of the strategies examined require the cooperation of several parties, including regulators, to be implemented successfully. (C) 1997 Published by Elsevier Science Ltd.