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California's decision to change their utilities regulation strategy to one based on performance-based regulation is being watched closely by the rest of the nation. California adopted retail wheeling to give consumers more choice, hoping to lower prices. The next step was the unbundling of electric services to allow for more targeted marketing, which will allow the market to determine capacity and promote conservation. It remains to be seen if the industry can remain vertically integrated in such a marketplace., The California Public Utilities Commission (CPUC) issued an order on April 20 proposing radical reform of the state's utility regulation. Specifically, the order would replace traditional cost-of-service regulation with competition [...]

Electric utilities rates vary from one locality to the next in the US and reflect the lack of competition within the industry. Electric utilities companies are not subject to the same market forces that promote management and pricing efficiency in other industries. Utilities companies enjoy a regional monopoly that is not subject to competitiveness from without. Furthermore, rates are determined on a cost-plus basis which inherently promotes inefficiency., A geographical uniformity of pricing for major products exists in the American economy and is based on competitive national markets that grew up under the interstate commerce provisions of the [...]

Public utilities and conservationist groups have joined forces in opposition to an Ohio bill that would institute retail deregulation in the state's utility industry. Public utilities oppose the plan because it would topple their monopoly control over the industry. Conservationists oppose it because they fear price competition will stall investments in environment-friendly technology. State consumers have not come forward in support of the bill even though they stand to benefit the most from the deregulations., A retail wheeling bill, introduced in the Ohio legislature by Rep. Ron Amstutz on February 28, has met with powerful and effective opposition from utilities and from conservation and environmental [...]

Government regulations have denied electric utilities the same efficiency incentives that customers have been provided. The energy crisis of the early 1970s resulted in an increased awareness of energy conservation. Consequently, efficiency of use has increased significantly. However, electric utility companies have shown little interest in increasing the efficiency of their power production, because regulations force them to reduce customer rates whenever the company enjoys lower production costs. Furthermore, regulations have forced utilities into long-term investments that tie them to technologies long after their obsolescence., Twenty years have now elapsed since the energy crisis irrevocably changed world energy priorities. The energy crisis banished all apparitions of cheap and almost limitless energy and made the public [...]

Deregulation in the public utilities industry has created great uncertainty among investors. Deregulation will likely result in lower rates and consequently lowered profits. Furthermore, subsequent regulations are likely to affect the industry in ways investors cannot yet forecast. Increased efficiency in electric energy production might further drive down rates by creating energy surpluses. Prospects for investors are not good. Deregulation may result in temporary disruption or large-scale bankruptcy., That increasing competition will put pressure on utility earnings is axiomatic. It will reduce the market power of utilities, and that will cut earnings. The extent and duration of this [...]

Technological advances which have made electricity generation relatively cheap have also made competition within the electric utilities industry economically preferable to the old monopolistic system. The previous expense of producing electricity led to large monopolies which could rely on a fixed client base. Consequently, they could offer reasonable rates with the help of government regulation. However, technological innovations have made a competitive market more viable and cost effective than before. The role of the regulator has changed from monopoly management to competition management., The growth of utility competition can be viewed as driven by two sets of interacting forces: economic (market) forces and political forces. The two sets bear on different aspects of [...]

The growing trend toward competition in the public utilities industry is demonstrating tangible savings to both the industry and the consumer. The costs of managed regulation are difficult to assess, but the industry's first steps toward deregulation already suggest that it represents far greater savings. Estimated savings for 80 sample utilities would be $31 billion. The call for deregulation is expected to grow as such figures become more widely known and proven., Assessing the costs of utility regulation has never been a particularly rewarding endeavor. The difficulty has stemmed from an inability to evaluate with confidence how the industry would behave in [...]

Statistics regarding the rates of 80 electric utilities from 1974 to 1990 show that rate regulation has not stimulated inter-utility competition or reduced overall consumer costs. The difference between residential rates in relation to annual utility fuel prices was studied to see if increased or decreased operational costs and efficiency would correspond to either increased or decreased rate regulation. Rate regulation was ineffective in encouraging utilities to initiate energy-efficient generation and distribution functions because regulators were unresponsive to utilities' conservation efforts., Much of the case for utility deregulation rests on the question of how effective regulation has been in properly pricing electric power and fostering an efficient allocation of resources. The [...]