Deregulation
Retail Electricity Prices are Higher in States
with Deregulated Power Markets, Study Finds
Energy information Administration data show retail
electricity prices are higher in deregulated states than in regulated
states and the gap is growing, according to a new study by Power
in the Public Interest. The price gap for industrial customers has
tripled since 1999 and industrial customers in deregulated states
now pay roughly $7.2 billion more annually for power than their counterparts
in regulated states, says the study, Price Trends for Industrial
Electricity: Deregulated vs. Regulated States. For all categories
of customers, the deregulated/regulated gap has more than doubled—from
2.1 cents per kilowatt-hour in 1999 to 4.3 cents/kWh in 2007.
“Deregulation is not responsible for the entire gap, but the so-called competitive electricity markets aren’t good for competitiveness,” said author Marilyn Showalter, who heads Power in the Public Interest. The wholesale market designs used by regional transmission organizations are the main culprit, she said.
Industrial prices in deregulated states were 26% higher than in regulated states in 1999 but 56% higher in 2007, the study found. Since 1999, prices for industrial customers in deregulated states have risen from 18% above to 37% above the national average. During the same period, the report said, prices for industrial customers in regulated states have gone from 7% below to 12% below the national average. In 1999, the EIA data show, industrial customers in deregulated states paid 5.23 cents/kWh on average, compared with 4.14 cents in regulated states. In 2007, the average industrial rate in deregulated states was 8.6 cents/kWh versus 5.52 cents/kWh in regulated states, the report said.
Real retail electricity prices tended down for both regulated and deregulated areas from 1991 through the 12 months ending July 2000, the report found. Since then, as deregulation has taken hold, real prices in deregulated states have increased dramatically while prices in regulated states have risen quite modestly, Showalter said. The Power in the Public Interest study looked at 12 deregulated states (California, Connecticut, Delaware, Maine, Maryland, Massachusetts, Michigan, Montana, New Hampshire, New Jersey, Rhode Island and Texas) and the District of Columbia.
- Public Power Daily, November 8, 2007
Shocking Prices Follow Deregulation
Months
after rate freezes expired, states that deregulated their energy
markets are scrambling to offset soaring electricity prices. The
Illinois legislature recently joined several other states in passing
rate-relief legislation that cut increases in half. The $1 billion
package will also dismantle a wholesale-power auction system and
establish a new agency to purchase power and construct generators.
In July, Virginia took it a step further by reinstating its electricity
regulation model. Other states such as Ohio, where rate freezes are
set to expire in December 2008, are considering partial regulation.
Critics blame the turn of events on deregulation's failure to
deliver on its pledge to lower rates and increase competition. But
others fault the rising
cost of fossil-fuels, particularly natural gas, which has tripled
since the late 1990s. There is also the matter of the limited number
of wholesale power plants and the failure of most large utilities
and their generation affiliates to construct transmission lines to
bring in out-of-state power, all of which have also contributed to
inflated power prices, critics say. (http://www.usatoday.com/money/industries/energy/2007-08-09-power-prices_N.htm)
- USA Today, August 9, 2007
Power Deregulation Creates U.S. Backlash
Several U.S. states are returning their power
markets to regulated systems after years of pricing failures under
the deregulated format. In Illinois, residents and businesses are entitled
to $1 billion rebate under a new law recently passed by the state Legislature.
Evidence of electricity deregulation's failure can also be seen in
Ohio, where consumer groups, ratepayers, utilities and politicians
are negotiating how to put an end to competitive electricity pricing.
Fueling the exodus in these states and Virginia, where lawmakers have
overturned the state's power deregulation law altogether, are escalating
electricity prices. Deregulation critic Marilyn Showalter, a former
utility regulator in Washington state, estimates that as of the year
ended May 31, customers in states that deregulated their power markets
paid an additional $48 billion for their power than they would have
in regulated states.
- International Herald Tribune, September 5, 2007
New Studies Confirm the Failure of Deregulation
As top Enron executives go on trial for fraud and conspiracy, few politicians
are talking about deregulation anymore. Market manipulation in California
cost that state billions of dollars. New studies of deregulated states
(by the Government Accountability Office and the Carnegie Mellon Electricity
Industry Center) confirm that not even industrial consumers benefited
and, in many cases, electric rates increased. For example, in Montana
for eight years before deregulation, industrial rates dropped about
1% per year. However, after deregulation (from 1998 to 2003), those
rates increased by 5.9% per year! Many states are experiencing increased
rates as rate caps expire. When Montana’s rate freeze ended,
residential rates rose 30%. Other states are facing increases of 40%
to 80% or even higher.
- Excerpted from 2005 IREA Annual Report
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