Restructured Electricity Markets: Three States' Experiences in Adding Generating Capacity

Jim Wells · Richard Cheston

11/2002 · DIANE Publishing

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In response to the Energy Policy Act of 1992, the Federal Energy Regulatory Commission, 24 states, and Washington, D.C., restructured electricity markets by shifting from service provided through a regulated monopoly-the local electric utility-to service provided through open competition among the local utility and its competitors. The 24 states and Washington, D.C., accounted for about 55 percent of total U.S. electricity retail sales in 1999. The restructuring was intended to increase competition and expand consumer choice in order to lead to increased efficiency and lower prices. In states that have restructured, decisions about whether to build new power plants to add to a region's generating capacity are made by independent developers-private companies not regulated by state utility commissions. Previously, the utilities and states' utility regulators made these decisions. To evaluate the adequacy of supplies of electricity, the North American Electricity Reliability Council- a voluntary organization of utilities-forecasts the generating capacity needed to meet future electricity demand.