.. the Energy Policy Act, the Federal Energy Regulatory Commission (FERC) ordered utilities in 1995 to open their transmission systems to outside energy providers. (National Association of Development Organizations, 1998) So far fifteen states have approved electrical utility deregulation. What follows here is a summary of some of their plans, based on information from the states and surveys collected by the Electrical Power Supply Association, and the National Rural Electric Cooperative Association. Arizona State regulators will allow competition for 20 percent of customers by 1999, for 50 percent by 2001 and for all by 2003.
Two utilities have filed suit to challenge the plan California The state permitted customers to choose their electric service providers as of Jan 1 of 1998. The customers have three options: retaining their current provider, switching to direct service by another provider or purchasing from a non-profit clearinghouse called the Power Exchange. The exchange bills its customers based on a metered hourly rate that fluctuates with the cost of electricity. State regulators will allow California utilities to collect $28 billion for old debts. Illinois The Illinois General Assembly passed a plan to require competition for local utilities beginning in 2002. The plan delays changes in assessed values of power plants for 3 years to soften the impact on local governments, which will collect lower property tax receipts if plants decline in value under competition.
New York The state will introduce utility competition through agreements reached with utilities. The state determines how much each utility collect to pay off old debts. Competition will be phased in for customers of Consolidated Edison of New York from 1998 to 2002, and the state will allow the utility to collect for some bad debts. Pennsylvania The state has begun a pilot program to introduce utility deregulation and will phase in utility customer choice to one-third of customers by 1999, two-thirds by 2000, and all by 2001. Michigan State regulators plan to phase in utility deregulation by 2002 and will allow recovery of old debts for utilities. Michigan Attorney General Frank J.
Kelley has joined consumer And business groups in filing suit against the Michigan Public Service Commission to challenge its utility restructuring plan. One way to solve the main concern of deregulation, stranded costs, would be to do what many states have already done, allow the utility companies to recover the costs of old debts, old debts being part of stranded costs. Long-term utility contracts and the building of new power plants to meet future electricity demand are a large part of these old debts. With deregulation the utility companies will no longer be mandated to serve all customers in a specific territory as they were in regulation. They will be able to pick and choose how many or how few to serve. Therefore they feel they should be compensated for their investments because they were required by the government to build more plants and enter long-term contracts.
If the national plan for deregulation includes an effective and feasible way to recover stranded costs, it would answer the main problem concerning deregulation. That would probably be the thing that would bring most everyone on board right there. As far as the problem regarding possible loss of social and environmental protections, the government could pass legislation that would require the private companies to operate within social and environmental boundaries. We wont know if this is going to be a major problem yet, the government is doing the right thing by allowing the states to experiment with deregulation. That way the kinks can be worked out with as little Trouble as possible.
You are going to have your bad apples in the bunch, some people just want to make as much money as they possibly can. They dont care if they destroy the environment or alienate people. But measures need to be taken to ensure that the people and companies that choose to operate in that manner are dealt with harshly. If they are allowed to get away with it then deregulation could become quite a disaster. We are on the verge of a major change with the advent of electrical utility deregulation.
It couldnt have come to light at a better time, here at the end of the 20th century. The face of business has changed many times throughout the course of American history without many problems. Deregulation presents a whole world of opportunities for business as well as the consumer. Entrepreneurs are afforded a marvelous opportunity. The ability to start or get in on the ground floor of a new and potentially lucrative business.
With privatization literally thousands of new jobs will be created, something that is always welcome with the United States ever growing population. For the consumer a whole range of choices will be in front of them. Before they had to use the utility company that served their region or they didnt get any service. Didnt matter if they didnt care for the company, or they constantly got bad service, you were stuck with that company. With deregulation the consumer will be able to choose whichever company they like.
Better still, they can choose to purchase all or just a portion of the services, much like cable TV. Business owners will also benefit from lower electricity costs. And they can choose the package of services that best fit their needs. To the opponents of deregulation, I would say to them lets see how it works out with the states before you condemn deregulation. There is an upside and a downside to every issue, we will see in time that the upsides far outnumber the downsides. And if it turns out that it isnt practical, then we can always go back to the old way.
All in all, I believe electrical utility deregulation is the future of the electrical utility industry, and of the United States as we usher in the new century. Bibliography Reliant Energy HL & P 1999 http://reliantenergy.com Power Watch Volume 3 No.1 Orlando Utilities Commission OUC Print Shop Jan 1, 1999 C Three Electrical Utility Deregulation: A State By State Analysis http://cthree.net/reports/dereg/index.html Houston Lighting and Power http://www.hlp.com NW Energy Coalition http://www.oz.net/ncac/facts.html Cost Control Associates-Energy and Telecommunications Consultants http://www.costcontrolassociates.com pur.com the Online Resource for Public Utility Information http://www.pur.com Low Income Home Energy Assistance Program (LIHEAP) Home Page http://www.ncat.org/liheap/dereg.htm The Roanoke Times Politics Utility Power Shifts February 25, 1999 http://rtonline1.roanoke.com/roatimes/news/story49 900.html Stranded Utility Costs The Nation, November 2, 1998 V 267 n14 p 23(2) Electrical Utility Deregulation By William Peterson PAD 4034 Tues-Thurs 11:30-12:45.