A New Strategic Model for Electric Utilities

A strategic planning model for electric utilities has been developed, which has been applied numerous times for financial analysis of utilities on behalf of a leading investment banking firm. The model has been successfully implemented for the Florida Power and Light Company.[1] More recently, the model, along with eleven others, was used to evaluate the relative merits of end-use versus supply investments in conjunction with the Electric Power Research Institute´s (EPRI) Utility Modeling Forum. [2] Because it was the only model which represented feedback effects, the results it produced were markedly different from those of the other eleven models. Further development and evaluation of the model was conducted to more clearly isolate and explain the effects of feedback relationships on utility financial performance, and to test the capability of the model to address important utility planning problems. This paper presents some results of these modeling studies. First, a base case is discussed, and then a number of alternative investment strategies are modeled.