September 15 , 2002
Anti-Competitive Impacts of Secret Strategic Pricing in the Electricity Industry
by Jul. 96 Oct. 95 as of 1996
Has allowed Secret "off-tariff" In 1992, secret Regulators ap- The Public Cor- Special secret Permits secret Puget Sound
special dis- discounts of up load-retention proved a secret poration Com- discounts have discounts, Power &
counts for to 7 years are contracts were discount for mission permits been permitted including Light has had
large industrial permitted under permitted. Now American Steel the two utilities since 1992. incentive rates. at least two
customers, new rules of the all rates are on & Wire Corp. to offer special confidential-but not New Jersey the public record. rates, but only discount
secrecy. But Board of Public for 10 customers contracts
discounts Utilities. during a test with large
have been period of two customers,
resisted and years. but has not
the issue is fought publi-under hearing cation when
and it was consideration. requested.
1Effective competition requires competitive parity among numerous rivals, so that they compete hard and effectively, forcing each other to be efficient and innovative in order to survive. In practical terms, there need to be at least 5 major competitors in each market, with no one firm holding dominance. There also needs to be relatively easy entry for new competitors. See, The Economics of Industrial Organization, and "Deregulation: From Monopoly Only to Dominance? Telecommunications, Railroads, and Electricity," Quarterly Bulletin, National Regulatory Research Institute, Summer 1996, pp. 149-61.
2See J.M. Clark, Studies in the Economics of Overhead Costs, 1924, Joan Robinson, The Economics of Imperfect Competition, 1932, James C. Bonbright, Principles of Public Utility Rates, 1962, and Alfred E. Kahn, The Economics of Regulation, 2 vols., 1971.
3In some cases the commission staff and a few intervenors may be permitted to inspect rates, but public disclosure is still barred.
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