Several state legislatures and/or regulatory commissions have recently approved, and others including federal legislators are currently considering, changes to laws and regulations governing the pricing of electricity. Specifically, those changes relate to the element of the total price of a kilowatt of electricity that is intended to cover its production ("generation") cost, as opposed to the portion intended to cover the transmission cost to a local area or the portion intended to cover the cost of distribution to individual residences or businesses. The nature of these regulatory changes has been to move away from a pricing model that has prices set by a regulator based on allowable cost toward and ultimately to a pricing model that has prices set by competitive market forces. Because market-based prices are ultimately expected to be lower than the former allowable cost-based regulated pricing, the impact of these regulatory changes on companies that generate electricity has been to Copyright © 1997, Financial Accounting Standards Board Not for redistribution Page 1transform some of their investment in generation operations into what has been referre
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