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Electricity in Europe And North America: The Grand Experiment

Has restructuring succeeded on either continent?

Fortnightly Magazine - February 2007

shift usage to off-peak?

4) Curing Congestion

Which system will better cure transmission congestion points and load pockets? Will one system better manage the vagaries of geography, population and demand growth?

5) Reducing Emissions

Which system will most cost-effectively control emissions from the production cycles of most electric generation? The success of sulfur dioxide emissions reduction trading, inaugurated under the 1990 Clean Air Act Amendments in the United States, has been coincident with the emergence of competition in electricity, but not dependent on electric industry restructuring. SO 2 trading has been emulated with other pollutants such as nitrous oxides and even mercury. Most recently, Europe has commenced CO 2 reduction trading.

6) The Next Generation of Nuclear Power Plants

Which industry structure will better accommodate a new generation of nuclear power plants? While other political, regulatory, environmental, technical, and financial issues will figure into the development of new nuclear plants, will an overlay of competition or traditional utility regulation be more hospitable?

7) Reducing Inter-Class Cross-Subsidies

Will one system or the other set prices more in keeping with cost-causation principles? A central tenet of competition advocates has been that market-based pricing conveys more accurate price signals that are linked to economic costs of service. On the other hand, some rate-regulation supporters may argue to the contrary, suggesting the need to more carefully incorporate “social costs.” Others may favor assisting residential customers at the expense of business customers, or vice versa when it comes to certain industries regarded to be of strategic importance or matters of local or national pride.

8) Low-Income Customer Connectivity

Which system will do a better job giving low-income customers access to essential electric service? In North America and in the EU, most residential electricity customers are not poor and are quite able to pay both for basic amounts of power and for purely discretionary usage. However, one widely shared objective is to better ensure that the poor can be connected to the network and have basic services available. Will one regime or another employ more creative and effective measures and leverage technology in pursuit of that goal? 7

9) Customer Satisfaction and Minimizing Political Controversy

Which approach will make for happier customers and less-agitated policymakers? Customer satisfaction research is widespread in the electric business, as it is elsewhere in the economy. Levels of customer satisfaction can be measured cross-sectionally and longitudinally to determine whether competitive or regulatory regimes are producing higher levels of customer satisfaction.

On a related front, the movement toward competition was in great part a search for a way to “de-politicize” price setting and other aspects of the electric business that had become serious bones of contention in the political arena. However, the outcome of the grand experiment is a political question fundamentally in both of the two great North Atlantic federal systems.

10) The Pace of Technological Innovation: Creating the InfoCom Utility

Will competition or more traditional regulation better accommodate development of what might be called the “InfoCom utility”? A key societal goal of the railroad model was extending the benefits of new and