Why competitive markets are scaring regulators.
Despite significant differences in how electricity is procured across the country, the objective often is the same. Regardless of whether the region has implemented retail competition or is subject to traditional regulation, the intention of the regulatory framework is to minimize the amount consumers spend on electricity. Industry observers, however, have begun to ask whether states that have introduced retail competition face demonstrably lower or higher electricity prices than those states that rely on a more classical, vertically integrated regulatory framework.
The answer largely is a function of the competitiveness of the wholesale electricity markets, as opposed to the specifics of how different states regulate their natural monopoly transmission and distribution companies. If the underlying wholesale electricity markets from which supplies are procured are competitive, then the remaining concerns regarding price levels and volatility can be addressed through regulatory policies.