The Fallacy of High Prices

Deck: 

We are better off under restructured electric markets.

Fortnightly Magazine - November 2006
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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.

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