Deregulation of the Electricity Industry
Electricity deregulation is an effort by the federal and state governments to drive down the cost of electricity to consumers by opening up the industry to competition. Since deregulation came to the electricity industry in 1996, the effort has brought mixed results.
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Background
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Historically, in the United States, power was produced by regional utility monopolies, which operated the power plants and transmission lines. States regulated the prices of electricity. In 1978, Congress approved the Public Utility Regulatory Policies Act, which allowed independent companies to produce power for utility companies. This was followed by the Energy Policy Act of 1992, which required utilities to share their transmission lines with independent companies in exchange for allowing prices to be determined by competitive markets.
Effects
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As of 2010, 15 states had implemented full regulation of their electric industries. Pennsylvania, where 450,000 of the state's residential electricity customers had switched electric companies, is cited as a successful model of deregulation. In California, on the other hand, deregulation led to market manipulation opportunities for power companies, which have cut power levels at times of peak demand, leading to blackouts, according to the Public Policy Institute of California.
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Criticisms
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According to Public Citizen, the states that still regulate power rates saw an average annual rate increase of 4.2 percent between 2002 and 2007. Deregulated states saw increases of 7.3 percent.
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References
- Public Policy Institute of California: What Can Be Learned from California's Elecricity Crisis?; January 2003
- Public Citizen's Energy Forum: The Failure of Electricity Deregulation: History, Status and Needed Reforms; Tyson Slocum; March 2007
- U.S. Energy Information Administration: Status of Electricity Restructuring by State as of September 2010
- Stateline: Pennsylvania's Electric Deregulation Seen As Success Story; Blair S. Walker; September 27, 1999
- U.S. Energy Information Administration: Electric Power Industry Restructuring Fact Sheet
- Photo Credit power station image by JCVStock from Fotolia.com
