Commercial buildings: Power plants for a deregulated utility market

The electric utility industry is a $250 billion market with a steady stream of revenue poring in at the rate of 12 to 15% from a still captive rate base. Even though deregulation of the electric market has only just begun, utilities across the country are changing their investment strategy for power generation, transmission or distribution equipment for fear of getting stuck with stranded costs. Where will they spend their growing cash reserves? Many are paying down their potential stranded assets, others are looking at international markets, while some are diversifying into ventures, such as telecommunications and cable television. With so many abandoning the traditional electric systems and services we have come to take for granted, one might ask, which utilities are going to invest in the needed infrastructure to continue to provide America's growing appetite for electricity? The United Stares building construction industry spends up to $100 billion a year on new construction projects. Developers continue to add more electric consuming buildings at a rate of 1.1 percent per year(1) to the 57.8 billion stock of US commercial building space(2). In 1998, developers will construct 600 million square feet of new structures requiring 5-8 gigawatts of electricity and costing $10 to $20 billion in new power stations, transmission lines and distribution equipment. Are utilities going to make the necessary investments now, and attempt to recover those costs through increased rates with deregulation coming? It is doubtful. With utilities looking elsewhere for growing their business it appears we may be headed for more power blackouts like those experienced last year in the West.