Deregulation In The Electric Industry :: essays research papers fc

Electricity is the principal force that powers modern society. It lights buildings and streets, runs computers and telephones, drives trains and subways, and operates all variety of motors and machines. Yet most people, despite their great dependence on electrical power, hardly give it a thought. They flip a switch, turn a key, or pick up a phone and expect the power to be there without fail. The almost-century old structure of the American electric utility industry is in need of change. Almost all interested parties accept the fact that technological change and altered views of the nature of government intervention have made the idea of increased competition attractive (Johnson 35). But just how should the competitive market be structured? Some participants want complete deregulation so they can derive the fullest benefits of competition quickly. Others argue that the unfettered free market, however, will cause hardship and inequities (36). Stability in electrical power has traditionally depended on a system highly regulated by federal and state government. In recent years, however, many leaders in government and industry alike have pushed for deregulating the system to make it more responsive to changes in business and technology and more open to the forces of free-market competition (Craven C5). Deregulation has been successful in reducing costs and promoting innovation in airlines, natural gas, telecommunications and other industries. The electric industry is next. Initial steps to deregulate electrical power are now being taken in the United States and Canada. Today the subject is being actively debated in board-rooms and state-houses across the Continent. Everyone is wondering what deregulation will do to the industry. People do not know how it will affect businesses and consumers, and they are debating whether to move fast or slow with deregulation. The "open access" rule of the Federal Energy Regulatory Commission went into effect on July 9, 1996. Known as Order 888, it applies only to wholesale transactions. It requires public utilities that own, operate, or control transmission lines to charge other firms the same transmission rates they charge themselves, under comparable terms and conditions of service (Encarta "Deregulation"). This will open control of the market, and it will prevent utilities from denying transmission grid access through prohibitively high rates. Public utilities, municipal utilities, and rural cooperatives are the only customers that are able to purchase wholesale power for resale. Office buildings provide the power to their end users, but the tenants, building