We begin the new year with a recap of the major rulings issued last year by state public utility commissions (PUCs).
Electricity took center stage as state commissioners began in earnest to examine rising competition in the power generation market. The seemingly endless number of privately sponsored seminars, conferences, and reports on the issue might suggest that regulators are following rather than leading on policy. But consensus remains far off. State PUCs are cautious (em carefully investigating retail wheeling and scrutinizing cost and service issues. This same caution shows up in the slowdown of ratepayer-subsidized conservation plans in several states in the face of excess capacity and rising energy costs.
Competition remained a focal point in telecommunications, with PUCs approving tentative openings in the local exchange market. While both natural gas and telephone utilities are farther along in reform, the level of regulatory activity has not diminished. If the past year is any guide, utilities can expect for some time to operate under prudence reviews, service standards, and least-cost planning rules. Regulators are still bound by legislation that requires rate protection for monopoly customers, while utilities continue to function under a duty to serve on demand.
Price-cap or incentive-based regulation methods are gaining converts in both energy and telecommunications markets to promote cost-cutting and other market efficiencies. Pricing flexibility is also now common in energy and telecommunications, where utilities can show competitive pressure. Nevertheless, where cost- of-service regulation has eased somewhat, regulators pick up the slack by policing the marketplace to ensure fair play among market participants.
Electricity (em Reforms Amid Hysteria