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Description
The Energy Policy Act of 1992 (EPACT) created a framework for a competitive wholesale electricity generation market and established a new category of electricity producer, the exempt wholesale generator (EWG). These EWGs were not subject to the constraints on nonutility electricity generation specified in the Public Utility Holding Company Act, which made it easier for them to enter the wholesale electricity market. The law also mandated that the Federal Energy Regulatory Commission (FERC) open up the national electricity transmission system to wholesale suppliers on a case-by-case basis. These provisions eliminated a major barrier for utility-affiliated and nonaffiliated power producers who want to compete to build new non-rate-based power plants. Most of these plants were expected to be gas turbines because of the lower upfront capital costs compared with those of large coal-fired plants.
EPACT also repealed the alternative minimum tax for some smaller producers and provided financial incentives to developers and users of clean-fuel vehicles, such as natural gas fueled vehicles.
Impact
EPACT, along with other regulatory measures, was intended in part to expand the use of natural gas. As the restructuring of the electric power industry was sustained in part by technological improvements in gas turbines, recasting economies of scale in electric power, EPACT contributed to the rise of gas-fired nonutility generators as the fastest growing source of electric generation capacity. Electric generation demand for natural gas has grown in significance in the natural gas market, accounting for about 22 percent of natural gas consumption in 2003. This compares with 17 percent only 7 years ago.
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