To the Editor:
In “Rate-Base Cleansings: Rolling Over Ratepayers” (November 2005, p.58), Michael Majoros urges state public utility commissions to recognize a refundable regulatory...
of the customer's load upon the power system. Meter installation service provides the equipment that measures the customer's use of power. Revenue cycle services include the meter reading and billing services that occur on monthly schedules and less-regular customer contact services. Energy services are debatably not a part of the distribution function at all, but some respondents nonetheless include them among distribution services.
Table 2 indicates the unbundled services that may be obtained from competitive sources in each of the responding nations. But unbundling also occurs without opening services to competition. For example, the Canadian and Norwegian respondents report that some services once offered as part of bundled distribution service, like energy audits or extra transformers, must now be purchased separately by the customer. Customers in Argentina and Chile must purchase line maintenance, meter reading, customer connection and billing services through their local distribution monopolies; but, to better control costs, these monopolies have adopted the practice of purchasing these services from subcontractors through competitive processes.
Unbundling has led to the introduction of new services, some of which are listed in Table 2. For example, new services in Australia include improved power quality control, sub-metering, energy analysis and reporting, lighting, power factor corrections, and consulting and financing services to customers who install energy-saving equipment.
The meaning of "unbundling" can vary among nations, even for a single unbundled service. In the U.K., for example, the installation of new assets like connections, transformers and meters is competitive; but once installed, the maintenance of that equipment becomes the responsibility of the distribution monopolist. A different unbundling scheme could make the customer who benefits from equipment responsible for equipment maintenance.
Market Power Problems;
Survey respondents report disparate market power issues. Some claim to have serious problems, while others say they are free of any such difficulties. Differences appear to arise from market organization. Consumer benefits are less clear cut, however. While respondents report that deregulation has led to dramatic drops in electricity prices, the effects of distribution service deregulation and unbundling is not so obvious. Here's a breakdown:
ARGENTINA. Distribution companies are subject to a form of incentive regulation that encourages them to lower their costs. It is hoped that this will lead to lower consumer prices.
AUSTRALIA. Market power is not an issue. Competition in generation services is robust, while distribution companies remain tightly regulated. Australia has seen electricity prices drop, but service quality has stayed the same or improved, and customers have gained some control over their power service. Most gains have occurred in generation services, but distribution companies also have become more efficient. Customers seem willing to pay for extra power services that improve power quality and reliability not only for themselves but for their neighbors as well. The continuing regulation of transmission and distribution assures adequate investment in power transportation infrastructure.
ALBERTA, CANADA. One generation firm has a 60-percent market share in Alberta. Some question whether this firm has the power to influence market outcomes at the distribution level. Incentives that discourage investment in power transportation infrastructure may harm service reliability