We are better off under restructured electric markets.
Howard J. Axelrod is president of Energy Strategies Inc. Contact him at firstname.lastname@example.org. David DeRamus is a partner with Bates White LLC, where he directs the firm’s energy practice. Contact him at email@example.com. Collin Cain is a manager with Bates White LLC in its energy practice. Contact him at firstname.lastname@example.org.
Since the Federal Energy Regulatory Commission (FERC) first issued Order 8881 more than a decade ago, the restructuring of electricity markets, both at the wholesale and retail level, has provided significant benefits to electricity customers. Unfortunately, rising retail electricity rates, resulting from sharp increases in fuel prices and, in restructured states, the end of years of artificially capped rates, have caused consternation among consumers, which in turn has raised the ire of politicians, some of whom are demanding a return to traditional models of rate-of-return regulation.
Yet, despite the headlines, our research—and that of several others—has shown that wholesale competition has been successful, especially in markets in the eastern United States, and will foster lower, more stable electric prices over the long term than a retreat to traditional rate regulation.