Competitive Bypass of Pacific Gas and Electric Harvard Case Solution & Analysis

In 1986, Pacific Gas and Electric (PG & E), a private company, the utility serving much of northern and central California, faced with the loss of many of their biggest and best customers. The threat does not come from conservation, the general economic depression, or competing utilities, but rather, customers begin to generate their own, or work on their own, small power stations. PG & E estimates, industrial and commercial customers are responsible for 28 percent of sales, rather it is cheaper to generate electricity on-site than to pay PG & E rates. The situation is puzzling PG & E regulators, California Public Utilities Commission (CPUC), who observed that the industrial and commercial rates could be reduced only by domestic consumers or the financial health of the utility. Furthermore, the balance of generating capacity in the region suggested that the new power plant will only make a bad situation even worse. Indeed, CPUC is also struggling with excess supply of third-party generation that utilities were required to purchase in standard contracts established CPUC. Case is designed to illustrate the issues related to the management capacity of the natural monopolies, with an emphasis on understanding the marginal cost. Although the case was designed to highlight the dilemma of regulators, it can also be taught in terms of utility. HKS Case Number 713.0. "Hide
by Carl Danner, Jose Gomez-Ibanez, John Mayer 19 pages. Publication Date: 01 January 1986. Prod. #: HKS536-PDF-ENG

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