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Contents
When FERC opened access to the transmission grid, it also called for the development of a real-time online system to show available transmission capacity and allow for the purchase and reservation of capacity by both purchasers and sellers of wholesale energy. Much of the focus of the current systems is on the Internet and the World-wide Web. Through secure browsers and authentication keys, ordinary Internet browsers would allow access to these systems without the hassle and cost of maintaining individual, separate dial-up bulletin board systems.
The next step that many states are looking at is allowing consumers to purchase electricity from the provider of their choice, known as retail wheeling. In the past, this was somewhat impractical because it would have been difficult to accurately measure and regulate the flow of electricity, but with today's more powerful and relatively inexpensive computer chips this is more realistic.
After years of regulation in the industry, some companies are opposed to deregulation and others are leading the charge.
Those who oppose deregulation are generally companies who would have "stranded costs" after the process is complete. Stranded costs arise when companies are not able to economically produce electricity under free-market competition, because they are accustomed to inflated prices that allowed them to cover expensive fixed assets.
This stranded costs problem is the main holdup in the deregulation process. Should companies be allowed to recapture stranded costs in some manner or should there be massive write-offs of uneconomical assets in the industry?
Another objection comes from consumer groups who are afraid that consumers will subsidize energy costs of large corporations who are able to negotiate lower rates than the average user. However, it is likely that groups of consumers could organize by city or town, or through a power marketer, and that larger group would be able to negotiate for the best rates.
There are many other issues related to the electric utility industry, such as privatization of government generating facilities, and repealing the Public Utility Holding Company Act. These topics will be covered in a future issue of the Spotlight. Below are reports and links directly related to the important and quickly-evolving state of the electric utility deregulation efforts underway in various American states.
The Cato Institute has been at the forefront of deregulation and privatization in the United States. Cato has published several articles on deregulation of electric utilities that are highlighted below.
In the past year, three articles have appeared in Regulation: The Cato Review of Business and Government
The feasibility of deregulation was discussed in an article in the Winter 1995 issue of the Cato Journal titled Competitive Markets for Electricity Generation.
As part of their latest Cato Handbook for Congress, Cato outlines all of the changes that need to be made in the electric industry in a chapter titled Electricity Deregulation.
Competitive Enterprise Institute
The Competitive Enterprise Institute is one of the leading free-market environmentalist groups. CEI fights against aid to logging companies and others.
CEI calls for deregulation in an article entitled Electricity Competition as part of their Environmental Briefing Book.
Reason is the premier libertarian magazine and one of the best Web sites for libertarian commentary. The folks at Reason also have some definite opinions on what needs to be done with the system.
In the May 1996 issue, Ed Carson has an article titled Power Struggle that discusses the controversy about the compromise plan in California that allows the power companies that own the local grids to recover costs by adding a surcharge on all electric bills, even if that consumer is with another utility company.
Many other groups are also working for deregulation in the electric industry. Below are some of their reports on the subject.
Adam D. Thierer of the Heritage Foundation explains the benefits and lays out a plan for deregulation of the industry in this paper titled Energizing America: A Blueprint for Deregulating the Electricity Market.
He has also prepared a set of talking points, Separating Fact From Fiction in the Debate Over Stranded Cost Recovery.
Additional information can be found on their Regulation Homepage under the Economic Issues page.
Cascade calls for the restructuring of the power industry in the Northwest, privatization of the Bonneville Power Administration and allowing free-market competition in a Fiscal Insight titled Power, Politics and Salmon-Restructuring the Northwest Power Industry.
CSE commissioned a study that showed that the average consumer would save $216 per year if consumer choice was allowed. The press release Monopolies Cost Economy Billions explains this study.
James Milner of the Oklahoma CSE chapter addresses some of the roadblocks and benefits of deregulation in his commentary Addressing Speed Bumps on the Road to Electric Utility Deregulation.
In January 1997, CSE released a follow-up to the study that answered some of the criticism leveled against it by the Electric Consumers Alliance. Customer Choice, Consumer Value -- Setting the Record Straight: The Consumer Wins with Competition answers the main criticisms point by point.
Center for Market Processes at George Mason University
In a new study entitled Economic Deregulation and Customer Choice: Lessons for the Electric Industry, Robert Crandall of the Brookings Institute and Jerry Ellig of CMP analyze deregulation in other industries and relate that to what can be achieved in the electric utility industry.
Progress and Freedom Foundation
The PFF has a project underway called Creating Competitive Markets in Electric Energy, which is working on practical ways to privatize government run facilities and deregulating the whole industry. As part of the kick-off of this project, they ran a workshop in computerized economic experiments at the Economic Science Laboratory at the University of Arizona that worked on models of how to manage a free energy market.
National Center for Policy Analysis
Power Play was a commentary from Investor's Business Daily about deregulation in California.
Many states are working towards deregulation now. Listed below are a few of them and links to specific information. Enron maintains a page that lists state-by-state status of deregulation.
EnergyOnline also maintains a comprehensive page on state-by-state Blueprints of Restructuring.
Minnesotans for an Energy-Efficient Economy has collected a large amount of information on the investigation being done the Minnesota PUC on deregulation on their Electric Utility Deregulation page.
California is on its way to deregulation and the California Public Utility Commission has a large amount of information available on its Electric Restructuring in California page.
New Hampshire currently has pilot programs underway and the Public Utility Commission has a large amount of information available at its Retail Competition Pilot Program page.
In the 105th Congress, there are two pending bills dealing with deregulation of electric utilities.
H.R. 655 Electric Consumers' Power to Choose Act of 1997 was introduced by Rep. Dan Schaefer (R-CO) and the bill is currently in the Subcommittee on Energy and Power.
S. 237 Electric Consumers Protection Act of 1997 was introduced by Sen. Bumpers (D-AR) and explicitly calls for recovery of stranded costs. This bill is currently in the Committee on Energy and Natural Resources. Sen. Bumpers office had a press release on January 30, 1997 to highlight the major points of the bill.
Companies that Support Deregulation
Niagara Mohawk Power Corporation serves 500,000 customers in upstate New York and in 1995 introduced a program called Power Choice to position themselves to take advantage of deregulation.
Pacificorp, parent company of Pacific Power and Utah Power, has drafted a white paper titled Moving Forward outlining their proposal for deregulation and consumer choice. Pacificorp serves 1.8 million customers in seven states and Victoria, Australia.
Enron, the largest wholesale marketer of energy in the world has a page dedicated to deregulation issues. Their president, Jeffrey K. Skilling has testified before the Senate Energy and Natural Resources Committee on deregulation. The press release and his testimony are available on their Web site.
Pacific Gas and Electric, which serves 4.4 million customers in Northern and Central California has a page dedicated to electric restructuring in California.
Carolina Power and Light Company serves 1.1 million customers in North and South Carolina. They support a well thought-out plan for deregulation.
A glossary of deregulation terms and other resources can be found at Public OnLine Group.
Electricity Futures and Options contracts began trading on the New York Mercantile Exchange in March 1996. Speeches from the opening day of trading are available in RealAudio format.
The Edison Electric Institute is the leading industry association. Its members serve more than three-fourths of the nation's electricity customers.
The Electric Utility WWW Resource List is a comprehensive set of links to Electric Utility companies, regulatory agencies and industry groups throughout the world.
The Power Marketing Association is the leading industry association for power marketers.
EnergyOnline provides business and regulatory information on the energy industry, with an emphasis on electric industry restructuring.
The American Local Power Project is a clearinghouse for information for local governments interested in or working for deregulation.
US Energy is training people to be Power Marketers in anticipation of coming deregulation.
Real-time Information Networks for Electric Power Marketing provides information on online systems for the sale and purchase of power and provides other links of interest.
"Power to the People" by J.D. Tuccille
In December 2004 this page was modified significantly from its original form for archiving purposes.
Free-Market.Net, founded in 1995, is now a part of ISIL.
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