Managing risk on available transmission capacity using performance contracting

Abstract

Deregulation of the electric utility industry is transforming a once vertically integrated organization into four separate, stand alone profit centers: power generation, wholesale power delivery (typically transmission lines and substations 69kV and greater), retail power delivery and energy services sometimes referred to as GENCO, TRANSCO, DISCO and ESCO, respectively. The management and directors of private and public power must make fundamental decisions about the kind of business they believe will maximize their profits or value for their constituents. Performance contracting offers the owner of an asset the ability to reduce the financial risk of inefficiencies, poor performance or system failure by agreeing to share savings resulting from higher efficiencies, improved performance or increased system availability with a contractor that provides some combination of engineering, operations or maintenance for the asset.