From: Kilovar's Substack

By: Kilovar 1959

Date: January 11, 2026

Operating Cost - The Driving Force of PowerPlant Survival

Hello Readers, welcome back, thanks for your continued support. In this piece I wanted to talk a little bit about costs and the continued operation of power generation facilities. Let’s discuss where we have been, where we are, and where we should be.

Back in the days before deregulation, when we had vertically integrated utilities, the cost of generation was less important. The utility owned all the generation they needed; power exchange between large utilities was limited largely to seasonal support and switched back and forth. New facilities were added on a proven as needed format approved by a state oversite agency. Existing facilities were operated until they were so obsolete it was no longer feasible to keep them in operation. This method assured that there was adequate generation available but limited the excess build for profit that we see now. Generation was dispatched by merit order; lowest cost first, then up the availability deck until the most expensive were in service, unless there was a reliability reason for an out-of-stack dispatch. The system worked for more than seventy years. Then Enron happened. It’s easy to lay all the blame on Enron, but there was lots of chatter about deregulation taking place; we were deregulating everything. “Let’s make some money” was the theme of the day. Enron happened to capitalize on the trend of the moment.

Deregulation changed the basic structure of the power industry, more so in generation than anywhere else. Suddenly electric energy was a commodity; it had a value which was bought and sold. This changed the dynamic from merit order dispatch to marketing. How much it cost you to produce the commodity you were trying to sell suddenly mattered very much, and many old thermal plants simply could no longer compete. (continue reading)

Operating Cost - The Driving Force of PowerPlant Survival