ABSTRACT
Electricity is produced by both utilities and nonutility entities, and it is sold in retail transactions with end-use customers and in wholesale transactions with other utilities for ultimate resale. Pricing of these transactions is market based and/or cost based. For example, in some jurisdictions electricity producers are permitted to compete in retail markets in which customers are allowed to choose an energy service provider and pay market-based prices for electricity. However, the electricity must then be transported from the producers to the customers by means of transmission and distribution (T&D) facilities that are owned and operated by the local utility. T&D power delivery service is typically regulated by a government agency under cost-based pricing. In many other cases, local utilities are fully integrated and have exclusive jurisdictional service rights; thus, their production and T&D functions are fully regulated under cost-based pricing.
