Economic benefits of reorganization

For an electric utility seeking to divest a nuclear plant, Brattle presented testimony on the economic benefits likely to ensue from a proposed reorganization. The plant was to be spun off to a jointly-owned subsidiary that would sell available energy back to the original owner under a contract indexed to industry unit cost experience. This proposal afforded considerable risk reduction for ratepayers in exchange for a reasonable, but uncertain, prospect of profits for new investors. The testimony compared the incentive benefits and potential conflicts under this arrangement to the outcomes foreseeable from more conventional incentive ratemaking arrangements to share future performance risks between ratepayers and shareholders without the reorganization.