"Incentives" for Purchased Power: Compensation for Risk or Reward for Inefficiency?

Long-term purchased power contracts are viewed by rating agencies as long-term debt.  Analysts who compare these contracts to alternatives must take this debt into account.  Fair enough.  But some utilities also have argued that they should receive compensation, not only for the debt-equivalent's risk effect, but also for the profits foregone because these purchases substitute for a utility-owned plant that would otherwise enter rate base and earn a return. This article, originally published in The Electricity Journal, critiques that viewpoint.