Off Peak

October 1, 2000

Dereg Dilemma

Why do U.S. electric bills continue to climb, when other liberalized Western countries are seeing reductions?

Electric deregulation in the United States isn't slashing consumer bills the way it has in other countries. Despite continuing restructuring, the price of U.S. electricity ranked second-highest in an April survey of 14 major Western economies.

"What we notice is that when [other countries polled] deregulate, prices tend to drop," says David Brown, vice president of National Utility Service Inc., the utility cost-management firm that conducted the annual survey. "In the United States, if there's been a drop, it's because they've mandated tariff reductions. However, when full market-based pricing comes online-and so far the only area in the States that's done that is San Diego-prices increase."

Further, prices continue to be increasing even as deregulation of U.S. markets continues. The average price of U.S. electricity was up 1.3 percent this year, compared to a 0.75 percent decrease from 1998 to 1999.

Higher prices can be attributed, in part, to inadequate supply. But, says Brown, plans to build new generation during the next few years is no guarantee that prices will come down in the foreseeable future, because independent power producers will aim to create a tight balance of power supply and demand.