PUCs in 1997: Managing the Competition?

Fortnightly Magazine - January 1 1998
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WHETHER YOU CALL IT "DEREGULATION" OR "re-regulation," the promised move to competition does not mean less regulation - at least not any time soon. State public utility commissions appear willing to experiment with market pricing and customer choice, but only under controlled conditions where they can protect certain presumed "public benefits."

Federal Energy Regulatory Commission Chairman James Hoecker, for one, sees the energy sector entering an "era of supervised competition." Speaking last summer in San Francisco before the National Association of Regulatory Utility Commissioners, he offered both carrot and stick in describing what PUCs and utilities could expect during his term. He promised a relaxation - through competitive initiatives, regulatory reform and efforts to "de-monopolize" energy markets - but warned of refining methods used to measure market power.

Hoecker's concern about market power underlies the basic problem: PUCs favor deregulation for industry segments where workable competition seems feasible, but workable competition is not yet evident in most traditionally regulated markets.

A review of leading state PUC decisions from 1997 does not offer any final answers. It is not yet clear how regulators will defer to market forces, avoiding the urge to pick winners and losers, and yet preserve public welfare benefits. For now a new triad of interests has emerged with each group seeking protection: (1) customers, (2) utility shareholders and (3) new market competitors.

Electric Choice: Still an Experiment

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