Electric industry restructuring is progressing at a rapid pace. Across the country, states are moving ahead to encourage retail competition. Two states have allowed retail wheeling experiments (Michigan and New Hampshire), utilities are proposing them, and over 20 states are studying the issue. Back in Washington, Congress is examining legislation to amend the Public Utility Holding Company Act (PUHCA). A few blocks away, the Federal Energy Regulatory Commission (FERC) is implementing the Energy Policy Act of 1992 in its Mega-NOPR (Notice of Proposed Rulemaking) on electric restructuring. Some also question the need for the Public Utility Regulatory Policies Act (PURPA).
In preparing for change, many companies will follow the traditional model of cost cutting. They will reduce staff and attempt to sell uneconomic assets. Unfortunately, they may also feel pressured to reduce investments with long-term payoffs, such as leading-edge efficiency techniques and renewable energy technologies. Without these, the nation could have trouble achieving important federal policy objectives.
Few experts doubt that wholesale competition has arrived in several regions of the country. Some believe retail competition is around the corner. In a market driven solely by economics, that could mean the lowest price always wins. In many cases, then, investments in renewables or energy efficiency would not be selected to meet energy-service requirements for consumers. Such beneficial investments could dry up without regulatory policies that consider the social benefits offered by these technologies. However, these new models will evolve slowly, while the new price-conscious market is taking off rapidly.