[en] Advocates of incorporating environmental externalities in electric utility decision-making have concentrated on new electric generating resources, with some success. Such public utility commission actions compel utilities to consider, explicitly, the cost of sulfur dioxide, carbon dioxide, nitrogen oxides and other emission of power-plants when comparing the economics of new generating resources with those of other resource options (e.g., demand-side management and gas-fired non-utility generator projects). This paper summarizes a study which estimated costs of incorporating externalities in utility system operations. We also present an analysis of the Tellus work in this area, and contrast Tellus' methodology, assumptions and results with our own. Estimates of the cost of incorporating externalities in system operations is rather large, in terms of the increased fuel and purchased power cost that ratepayers would have to bear. For the eight cases we examined, the incorporation of externalities caused fuel and purchased power cost to be 9.3 to 69.5 percent higher, relative to what it would have been under traditional generating unit commitment and dispatch. Furthermore, we believe that these estimates of fuel and purchased power cost increases are conservative. In particular, because our analyses focused on utility system operations in 1995, the key assumption about the fuel cost differential (i.e., coal versus natural gas) probably underestimates the differential in later years, significantly, when virtually all forecasters foresee faster cost escalation rates for gas. In general, the higher the fuel cost differential, the faster cost escalation rates for gas. In general, the higher the fuel cost differential, the greater the cost of an externality policy. Unless the record is set straight soon, the idea that incorporating externalities is virtually costless will further spread in the regulatory community and among government policy-makers