Benchmarks

Fortnightly Magazine - January 15 2001
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Some benefits promised by deregulation seem uncertain, but the industry is ripe with new ways of doing things.


The past year was a tumultuous one for electricity markets. The march of retail competition continued to move forward. Most notably, San Diego residents were the first customers in the United States to be granted the freedom to choose their electricity supplier without the backstop of price caps, frozen rates, or standard offer service at guaranteed prices. The timing of San Diego's first foray into retail competition without retail price caps could not have been worse. Customers were subjected to the volatility of wholesale markets just as gas prices doubled, NOx allowance prices more than quadrupled, and a tight supply/demand balance of generating capacity caused prices to spike. San Diego customers had expected to benefit from price reductions when their price cap and transition cost collection period ended. Instead, the bill of an average residential customer in San Diego rose from $55 per month to $150 per month.

Despite this retail-level deregulation debacle, it is important to note that deregulation at the wholesale level has achieved the intended consequence of increasing innovation in the supply of power. There are numerous examples.

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