Oil backout and the price of electricity

In this paper, we examine the probable effect on electricity rates of an overbuilding strategy for several different types of utility companies. A computer simulation model is used to project the price of electricity that a hypothetical, oil-dependent, investor-owned, electric utility would have to charge in order to recover its annual costs and earn the allowed return on investment. The final results take the form of penalty/cost curves showing the values of the oil backout cost ratio for which overbuilding would lead to higher/lower rates.