is a map of Deregulated States and states that has put
deregulation on hold because of poorly written legislation
deregulation is set up properly by each states legislators, it can be a
very positive opportunity for the consumer. Some states however
have failed to put safety nets in place for the consumer. For that
reason, PowerPartners has
elected not to do business directly in those states. Where a
corporate home office is located in a region that has passed good
legislation to protect the consumers and has outlets in states with
poorly written legislation where PowerPartners has
elected not to do business. PowerPartners
will help the corporate office
to switch the electric accounts of their subsidiaries located in
deregulated areas even when we do not actively solicit commercial
accounts in that area.
following article tells you why PowerPartners
has elected not to work specific markets. In states where
deregulation was not set up properly, PowerPartners
feels it is to our advantage to only solicit business in states
where deregulation is working to the consumers good. In those
states that have good deregulation legislation, the consumer has an
opportunity to save a lot of my by choosing a new electric provider.
following article can be viewed at the following URL.
THE PARTY LINE
- WHAT’S THE ISSUE?
The U.S. electric
industry is undergoing a sea change in the way it
delivers electricity to millions of households and businesses
nationwide. The $220 billion industry, which has been called the
last great government-sanctioned monopoly, is slowly but surely
being deregulated and opened to competition, giving consumers the
power to choose their electricity provider in much the same way they
choose telephone carriers.
of deregulation say reducing government control of the industry will
benefit consumers – lowering prices while expanding services and
giving the public a say in who supplies the power that runs their
computers, toasters, lamps, and more. But among the 24 states that
have enacted electricity deregulation plans, results are mixed.
Rising prices, skyrocketing demand, and limited supply in some areas
have raised questions about the viability of deregulation. At the
same time, Congress has been unable to agree on a measure to
introduce competition to the electricity market.
- HOW IT MAY AFFECT YOU
deregulation delivers the benefits touted by its
supporters – including lower prices and more services – is an
open question. Pennsylvania’s deregulation experiment, enacted in
1998, has been a rousing success by most accounts. Nearly 500,000
consumers – more than 11 percent of ratepayers – had chosen to
leave their utility company as of Oct. 1999, reports The
Washington Post. In the Philadelphia area, residential customers
who chose the least-expensive electricity supplier were saving about
$10 per month.
is much different in California, which in 1996 became one of the
first states to enact an electricity restructuring plan. Not long
after the plan went into effect, price increases began to whittle
away public support for deregulation in the Golden State. Just two
years after deregulation was enacted, California consumer groups
succeeded in putting on the ballot an initiative that would have
thrown out the state’s deregulation plan. The measure failed.
Criticism of deregulation intensified in the summer of 2000, when
limited power supplies and increasing demand caused the wholesale
price of power to soar throughout the state. In San Diego, where the
retail price of power fluctuates directly with the wholesale market,
electric bills doubled. The problem grew markedly worse in the
winter of 2000/01, as the state's electric utilities faced a
financial crisis and consumers were met with electricity shortages
and skyrocketing prices.
- HOW THE INTEREST GROUPS SEE IT
everyone involved with the issue seems to agree that electricity
deregulation can work. The major question is how. The
drive for electricity deregulation is being led by seven groups,
each of which advocates changes to the current system that provide
the greatest benefit to their members, reports Congressional
Quarterly. The groups have spent a combined $50 million lobbying
lawmakers, according to their own reports to Congress, which are
believed to contain extremely conservative figures.
vary in their approach to deregulation. The first point of
contention is whether Congress should repeal the 1935 Public Utility
Holding Company Act (PUHCA), which gave big utilities a monopoly in
their geographic area but prevented them from expanding their reach.
The law was enacted to prevent national conglomerates from
dominating the electricity industry, and some groups -- namely large
investor-owned power companies -- contend that the law now stands in
the way of increased competition that could lower prices and improve
services. Other groups, including utilities owned by government
agencies and municipalities, are concerned that repealing PUHCA
would do away with important consumer protections.
other ways the groups vary in their approach to deregulation. Some
groups want to make sure they aren’t squashed by the large
investor-owned electric companies in a deregulated system. The American
Public Power Association, which represents utilities
owned by municipalities or other government agencies, wants the
ability to compete fairly with the large investor-owned electric
companies. It also favors government monitoring of the electric
market to ensure fair pricing and access.
groups want deregulation to come free of additional government
oversight that would favor rural, independent, and government-owned
Electric Institute, the giant trade association of
investor-owned electric companies and utility holding companies,
opposes additional federal regulations on investor-owned electric
companies that would curb the market power of those companies. It
supports giving consumers a choice of electricity providers –
including their present providers.
category of groups is concerned about deregulation’s overall
effects on small electricity providers and consumers. The National
Rural Electric Cooperative Association, a national service
organization that represents consumer-owned cooperative electric
utilities, is worried that electricity deregulation could have a
negative impact on residential customers, small businesses, farmers
and ranchers. It wants Congress to give regulatory authority to
states, and to allow electricity cooperatives to regulate
- HOW IT ALL BEGAN
of the current system of energy production and delivery date back to
the New Deal era, when Congress brought an end to the tight reign of
large interstate holding companies that controlled more than 75
percent of the country’s electric generating capacity. The Public
Utility Holding Company Act of 1935 (PUHCA) forced the holding
companies to break up, and gave utilities a government-sanctioned
monopoly over a limited territory. In exchange, utilities agreed to
provide reliable electric service to all customers at a regulated
rate. The law resulted in the formation of nearly 300 power systems
and 800 rural cooperatives, reports Congressional Quarterly.
worldwide oil embargo in 1973 had a dramatic impact on the electric
industry. Although the embargo was most famous for creating
interminable lines at the gas pump, it also produced sharp increases
in electric utilities’ costs. The result was a surge of interest
in alternative forms of energy. In 1978, Congress passed the Public
Utility Regulatory Policies Act (PURPA) requiring utilities to use
"renewable" energy, which is produced from wind, solar,
and other sources. Both PUHCA and PURPA would later be viewed as
impediments to workable national electricity deregulation.
1990s, a growing chorus of voices within the electricity industry,
Congress, and the federal government was pushing to bring
competition to the industry. Congress opened the system to
competition in 1992 with the National Energy Policy Act, which
allowed power producers to compete for the sale of electricity to
utilities. In 1996, the Federal Energy Regulatory Commission (FERC)
issued what would become one of its most famous orders. Order 888
required utilities to open their transmission lines to competitors.
Soon thereafter, New Hampshire launched a pilot program allowing
competition, as did Arizona, California, Massachusetts,
Pennsylvania, and Rhode Island. These actions at the state level
fueled the fire for a national deregulation plan.
- THE MONEY
As talk of
national electricity deregulation intensified in the 1990s, electric
utilities -- not surprisingly -- increased their
political contributions to candidates and parties. In 1992,
utilities contributed a total of $5.4 million in individual, PAC,
and soft money contributions. That figure nearly doubled to $9.5
million in 1996. That figure could double again when the final
statistics for the 2000 election cycle are known.
strongest area of growth in political giving from electric utilities
has been in the form of soft money. In 1992, utilities contributed
just $556,000 in unlimited, unregulated soft money to the Democratic
and Republican parties. By 1996, soft money contributions increased
by more than six times to $3.6 million. The industry's soft
money contributions more than doubled in the 2000 election cycle to
approximately $8 million.
that every major group within the electric industry is pouring money
into political activities. In fact, there’s so much money being
thrown around that some observers say Congress has little incentive
to resolve the matter quickly. Lobbyists, too, are reaping the
benefits of the issue. One lobbyist even called it the
"two-Lexus bill," reports C Q Weekly.
undisputed lobbying leader in this issue is the Edison
Electric Institute, which has spent tens of millions of
dollars lobbying Congress on behalf of large investor-owned electric
companies. Other types of electric companies are also in the game.
Rural electric cooperatives are led by the National
Rural Electric Cooperative Association, which is consistently
among the industry’s top 10 contributors to candidates and
parties. Municipal and government utilities, represented by the American
Public Power Association, are also active in lobbying
elected officials, albeit to a much lesser degree than the wealthy
there are the advertisers. As any Congressional staffer or lobbyist
knows, publications aimed at Congress have been filled with ads from
companies and groups staking out positions on the debate over
electricity deregulation. These groups include Americans
for Affordable Electricity, a coalition of large-scale
business consumers of electricity; Citizens
for State Power, a conservative coalition backed by
investor-owned electric utilities; and the Electric
Utility Shareholders’ Alliance, a coalition of
cooperatives, investor-owned utilities and labor interests.
As late as
1994, electric utilities slightly favored Democrats over Republicans
with their campaign contributions. But like many industries,
electric utilities dramatically increased their preference for
Republican candidates and committees following the GOP takeover of
Congress in 1994. Between the 1994 and 1996 election cycles, the
proportion of contributions from electric utilities going to
Democrats dropped by nearly half, from 53 percent to 32 percent.
During the same period, the proportion of contributions to
Republicans leapt from 47 percent to 68 percent. Electric utilities
continue to favor Republicans with their campaign contributions by
more than 2 to 1.
THE ISSUE IN CONGRESS
deregulation has been the focus of pointed debate in Congress as far
back as 1996, but the absence of consensus – among members of
Congress and the various groups lobbying them – has resulted in little
during 1999 and 2000 focused on whether the federal government or
the states should be responsible
for overseeing a deregulated system. Those who supported giving the
FERC authority included Rep.
Thomas Bliley (R-Va.), the retiring chairman of the House
Commerce Committee, and Sen.
Jeff Bingaman (D-N.M), ranking member on the Senate
Energy and Natural Resources Committee. Favoring state
control were Rep.
Joe Barton (R-Texas), chairman of the House Commerce
Energy and Power Subcommittee, and Sen.
Frank Murkowski (R-Alaska), who heads the Senate Energy
and Natural Resources Committee.
Murkowski each put forth deregulation proposals in the 106th
Congress, but neither man got very far. In the House, Barton’s
a bill in Oct. 1999 that would grant states most of the
power to oversee a deregulated system. The vote
was 17-11. Bliley, wary of giving the states that much power, called
the full committee together in the summer of 2000 to consider his
bill, but adjourned the session without so much as a vote.
tried unsuccessfully to move his deregulation proposal through the
Senate Energy and Natural Resources Committee. Instead, the panel
approved a more limited measure that seeks to guarantee reliability
of the nation’s power grid. The Senate passed the bill June 30,
but the House did not act on it before the 106th Congress
prospects for passage of national electricity deregulation in the
107th Congress are unclear. The fallout from California's failed
deregulation experiment could dim the level of enthusiasm among
deregulation proponents in Congress. Another question mark is how
the issue will fare in the retooled House Energy and Commerce
Committee. Rep. W.J. "Billy" Tauzin (R-La.), the
committee's new chairman, has not taken a leading role in the
deregulation issue thus far. But the electricity industry is very
familiar with him -- Tauzin is one of the top 10 House recipients of
money from electric utilities.
is publishing the the
following article because regardless of the reason, the price of energy
is increasing at an alarming rate. To protect themselves, the
consumer needs to aggressively find a provider willing to sell them
power at a lower kWh rate and can be viewed at the following URL
but it hasn't worked that way in all markets. In markets where
poorly written legislation was passed consumers are paying higher
has chosen not to do business in those particular areas until good
legislation is passed that will protect the consumer.
deregulation of electric markets, a consumer pinch Competition was supposed to lower
prices in deregulated states. But faster-rising rates there are spurring
a backlash. It's
the slow season for the Laundromat in tiny Milford, Pa., yet owner
Darryl Wood has raised the price of a wash by 50 cents this year, to
$2.50. The reason? It is because electric rates that were supposed to
drop have more than doubled since January,
threatening to close the lid on a business his family has run for
already seen an electric bill higher than anything that I've ever
gotten," he says. "I thought deregulation would bring rates
down. Now, I'm just hoping we can hang on." His ordeal
reflects the fresh dismay many consumers are feeling about the
deregulation of the electric utility industry. When deregulation was
implemented in the 1990s, supporters said it would drive rates down
But data so far suggest that
rates in deregulated states are rising faster than those in regulated
states. That trend could expand as caps on retail electric rates, which
have held prices down, are lifted in at least six deregulated states
The issue is heating up:
In Maryland, where homeowners were threatened with a 72 percent rate
hike this summer, deregulation is suddenly a major issue in the
governor's race. In Delaware, where Delmarva Power set forth rate
jumps of at least 59 percent, lawmakers responded by phasing them in
over several years and requiring power companies to do long-term
Price comparisons are limited
because rate caps are only just being removed. But in New England, where
many caps came off last year, retail electric rates surged about 15
percent - except for Vermont, where regulated rates are roughly flat. In
the Mid-Atlantic region, rates in deregulated New York have risen 16
percent since 2002, while rates in still-regulated West Virginia were
Such unexpected disparities
are prompting a backlash in states that recently allowed markets to set
wholesale and retail pricing. And it's fueling a debate over what went
wrong. Industry officials blame price spikes on higher fuel costs
and rate caps set too low years ago. But fuel hikes are only a partial
explanation, analysts say. Lack of competition and the ability of
companies to sway markets to maximize profits may be factors, too, they
"There has been and is
today no true competition in wholesale and retail electricity
markets," the Electricity Consumers Resource Council wrote in a
filing with the Federal Energy Regulatory Commission in November.
Power companies strongly disagree. "Competition has been
incredibly robust," says John Shelk, president of the Electric
Power Supply Association. "People believe if prices rise something
is wrong.... But the reason is the cost of [fuel] increased."
That hasn't cooled the anger
in Pike County, Pa., which includes Milford, where residents are telling
regulators that the doubling of their rates is outrageous. Just two
suppliers bid in an auction to serve the area last October. "It
seems a little fishy to some people," Mr. Wood says. "It's
very bad for the economy here and for morale."
Some states are even
considering re-regulation. But getting the "genie back in a
regulated bottle" may be difficult or impossible, says Christie
Rewey, an energy specialist at the National Conference of State
Legislatures in Denver. Many states sold their generating stations
for a song in the 1990s, she says. Now these same states find that those
old plants are a gold mine for their owners and would be very costly to
16 of 23 states that initially passed electricity deregulation offer a
fully deregulated power system, studies show. At least 34 states
have repealed, delayed, suspended, or have limited retail access to just
large customers or are no longer considering deregulating electricity
for retail customers, according to a study last year.
Take Montana. It once had the
region's lowest electric rates, but sold off its hydro-dams and
deregulated in 1997. Some legislators there want the state to buy back
those dams. "The power those dams generated for less than $20 per
megawatt hour has jumped to over $31 since deregulation," says Don
Judge, a political consultant in Helena, Mont. "It's ironic that we
sold them in the first place, and now we're paying the price for making
such a terrible mistake."
Industry defends benefits of deregulation. The
re-regulation push worries some industry officials. "Absolutely, we
are worried states will try to turn back the clock," Mr. Shelk
says. "It would be bad for us, but in [the] long term bad for
states, too." Industry officials have launched a campaign
called COMPETE to tout the benefits of competition. And they cite two
studies showing that deregulation has saved consumers between $16
billion and $34 billion so far. But other studies by academics and power
consumers dispute those findings.
"At best, at this point
in time, no discernible overall benefit to retail consumers can be seen
from restructuring," wrote Kenneth Rose, an independent energy
consultant, in an analysis of deregulation last year. Consumer
anger, others contend, is the surest sign that deregulation has not
lived up to its promise. Disappointment is strong in the PJ M
wholesale power market, which covers a region with 51 million people in
all or parts of 13 states, including Pennsylvania, New Jersey, Maryland,
Delaware, Ohio, and Virginia.
In Pennsylvania, which
deregulated electricity in 1996, most households are still protected by
retail rate caps until 2010. Yet even Irwin "Sonny" Popowsky,
the state's consumer advocate on utility pricing and a one-time booster
of electricity restructuring, is shaken. "I'm just really
disappointed and shocked by the results in places like Pike County,
Maryland, and Delaware," he says. "This isn't the way
supposed to work. The consumer was supposed to be able to be free
to pick a lower price provider."
Market prices in New York and
New England (except Vermont), where rate caps have come off, are often
set by the highest-cost facilities. "These generators all get paid
as if they're running a natural-gas-fired machine at double or triple
the rate - and that has thrown the equation off," says Gerald
Norlander, executive director of the Public Utility Law Project of New
Analysts also blame poor
competition in residential markets on the higher costs companies incur
serving smaller customers. In Ohio, for instance, customers like Mary
Babcock want to compare offers from the eight power companies doing
business there. But she can't. Instead of adding competitive
pressure to sell electricity at lower cost, deregulation in Ohio has so
far yielded just one company interested in selling Mrs. Babcock power -
the same one that's sold it to her for years. "No competitive
retail electric service providers are currently enrolling
customers," says the Ohio Public Utilities Commission Web page.
That's bad news for Babcock.
But it's far worse news for Bob Flygar, manager of Eramet Marietta,
Inc., a southeast Ohio branch plant that makes alloys for hardening
steel. Electricity rates that have leaped 50 percent since 2004 could
mean "eventual demise of the Eramet plant" and 400 jobs, he
testified before the state utilities commission last October.
"We need a healthy dose
of real competition," says John Anderson, president of the
Electricity Consumers Resource Council. "We were deregulation's
first supporters. But all we've really done is go from one regulatory
structure to a new one that is less customer friendly." He
and other critics also allege that a key negative feature in each market
is "market power" - an oligopoly situation that may be
allowing generating companies to whipsaw prices upward.
Market power worries Howard
Spinner, director of economics and finance for the Virginia State
Corporation Commission. In his analysis of PJM's market data from last
year, Mr. Spinner found 41 generating units he says may be employing a
strategy of "economic withholding," which could effectively
cut power supplies and raise prices. But he's not certain, since PJM
won't release critical data for analysis - something the transmission
"We've heard these
charges before," says Ray Dotter, a PJM spokesman. "Our
independent market monitor has consistently said it is
competitive." Hockey-stick bidding:
Market power in action? But Dr. Rose, the energy
consultant, sees what may be subtle attempts to influence prices through
strategic bidding that, when graphed, resembles a hockey stick. He
points to July 27, 2005 - one of the hottest days in PJM last summer -
as a case in point.
A big power company started
the bidding with a very low offer: 4,300 megawatts for zero dollars or
other nominal amounts, Rose says. It offered the next 2,700 megawatts at
gradually higher prices until it reached $100 per megawatt hour. But the
last 1,000 megawatts were offered at $200 to $1,000, and it's those last
high-cost blocks of power that often set the rate overall.
That, he says, could be
evidence of market power. PJ M officials strongly reject
allegations of tacit collusion. On the hot summer day in question,
prices peaked at $512 per megawatt hour. Hockey-stick bidding is "a
common market mechanism," says Joseph Bowring, PJ M's internal
watchdog. It ensures prices high enough to lower consumption and
"keep the market from running out of power."
Back in Milford, officials
will soon hold hearings into the power auction process. And hopes are
growing that a new auction may be held and a lower-cost supplier found.
"All the consumers up here are saying: 'Now, I see how this
deregulation works,' says David Wilson, executive director of the Pike
County Chamber of Commerce.