Long-Term Consequences of Selected Competitive Strategies During Deregulation of the U.S. Electric Utility Industry: System Dynamics Modeling and Simulation
Date of Submission
1997
Document Type
Dissertation
Degree Name
Doctor of Science in Management Systems (Sc.D.)
Department
Management
Advisor
Abbas Nadim
Committee Member
Omid Nodoushani
Committee Member
Matthew Sanders
LC Subject Headings
Electric utilities--Deregulation--United States, Electric utilities--Management--Simulation methods
Call No. at the Univ. of New Haven Library
AS 36 N290 Mgmt. Syst. 1997 no.2
Abstract
Currently, U.S. investor-owned utilities (lOUs) are facing major reforms in their business environment similar to the airlines, telecommunications, banking, and insurance industries. As a result, lOUs are gearing up for fierce price competition in the power generation sector, and are vying for electricity customers outside their franchised service territories. Energy experts predict that some lOUs may suffer fatal financial setbacks (especially those with nuclear plants), while others may thrive under competition.
Both federal and state energy regulators anticipate that it may take from five to ten years to complete the transition of America's electric utility industry from a regulated monopoly to a market-driven business. During this transition, utility executives are pursuing aggressive business strategies to confront the upcoming price wars. The most compelling strategies focus on cutting operation and maintenance (O&M) costs of power production, downsizing the work force, and signing bilateral energy agreements with large price-sensitive customers to retain their business. This research assesses the impact of the three pivotal strategies on financial performance of utilities during transition to open market competition. A system-dynamics-based management flight simulator has been developed to predict the dynamic performance of a hypothetical lOU organization preparing for market competition. The simulation results show that while the three business strategies lead to short-lived gains, they also produce unanticipated long-term consequences that adversely impact the organization's operating revenues. Generally, the designed flight simulator serves as a learning laboratory which allows management to test new strategies before implementation.
Recommended Citation
Khalil, Yehia F., "Long-Term Consequences of Selected Competitive Strategies During Deregulation of the U.S. Electric Utility Industry: System Dynamics Modeling and Simulation" (1997). Doctoral Works at the University of New Haven. 27.
https://digitalcommons.newhaven.edu/dissertations/27