Problems With Appraising Electric Utility Assets After Deregulation (9b7f9b1b-6191-4f06-b182-7adc8e5b7333)

Until recently, the generation of electricity was regulated in all states and the value of generation assets in a regulatory environment for ad valorem taxation were based largely on the book value of the plant plus the rate of return on capital allowed by the state regulatory agency. This method of appraising utility generation assets is inappropriate in a competitive environment because past capital expenditures are not relevant in a competitive environment. However, it is not clear what valuation methods are appropriate after restructuring. This paper identifies key problems and advantages of other appraisal methodologies and makes comments on various valuation and taxation methods.