Utility Deregulation
Can the power industry be opened to competition?
By Adriel Bettelheim

The $220 billion U.S. electricity market - sometimes dubbed the last great government-sanctioned monopoly - is slowly being opened to competition. A total of 24 states have passed deregulation plans that allow residential and commercial consumers to choose their electricity supplier, and at least as many other states are studying free-market proposals. Already, several deregulated states have delivered. . . .

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Should federal regulators be given expanded power to police the unfettered electricity market?

Alan H. Richardson Executive Director, American Public Power Association . From testimony before the House Commerce Energy and Power Subcommittee, Oct. 6, 1999.	Thomas M. Lenard Vice President for Research, Progress & Freedom Foundation. From Investor's Business Daily, Oct. 26, 1999. Used with permission.

Demystifying Deregulation

Following are some frequently asked questions about electricity deregulation:

Why the big fuss about electricity deregulation? -- Because electricity is big business. Electricity sales in the United States generate an estimated $220 billion a year in revenue. As various states open this vast industry to competition, they are breaking up a system in which power companies were treated as regulated monopolies for most of this century. Similar deregulation of airlines, telecommunications and other industries is credited with bringing lower prices, improved service and market innovations. Advocates hope it will do the same in the power business.

Does deregulation mean not having to deal with your local utility ever again? -- Hardly. Even if a residential customer switches power suppliers, the local utility will continue to transmit electricity over its wires to the residence. If there is an outage due to a storm, the ratepayer still must call the local utility. But the local utility essentially becomes a power shipper; the electricity that is being transmitted is a commodity that the consumer ordered from another vendor.

How can consumers compare rates? -- Electricity usage frequently is measured in kilowatt-hours. Monthly bills list the current charge. In states with deregulation, utility commissioners or state consumer advocates have set up Web sites and phone services allowing consumers to check which vendors serve their areas and what rate each offers. Consumers in affected areas also likely will be besieged with advertising from utilities. Customers who consider changing suppliers need to ask whether there are transition fees or other charges associated with the switch.

Will every service area in a state be deregulated at the same time? -- Probably not. Outlying areas that aren't served by big electric companies typically are on different schedules and will get electric choice later. Municipally owned utilities decide on their own whether their customers will have a choice of vendors. Some states like New Hampshire inaugurated pilot programs in particular service areas.

Will consumers have the option of obtaining power from environmentally friendly energy sources? -- Many residents in deregulated states can buy “green power.” However, “green” can be expensive. In Philadelphia, customers recently were paying 6.2 cents per kilowatt-hour (kwh) for 100 percent renewable energy, compared with an average of 5.7 cents per kwh paid by regular residential customers.