Driven by revised views of the value of deregulating once-regulated industries, wide differences in electricity rates across the country, and new generation technologies that are cheaper and more rapidly deployed, the electric utility industry continues to evolve toward a state of greater competition -- though not without some turmoil. The Energy Information Administration's latest report on the restructuring, The Changing Structure of the Electric Power Industry 2000: An Update, reviews the history of the industry and the forces behind the restructuring movement, and then describes the Federal and State roles in promoting competition and the resulting effects within the industry.
As of July 1, 2000, 23 States and the District of Columbia had enacted legislation, and New York had issued regulatory orders, to restructure their electric power industries (see figure). Such laws or regulations were pending in Alaska and South Carolina, while 16 States were still investigating the issue and 8 were taking no related action. Regions where electricity costs to consumers are relatively high, such as California and the Northeast, have moved farthest in
promoting retail competition.
California, with the tenth-highest electricity prices in the Nation (expressed as average revenue per kilowatthour), launched its restructuring bid in September 1996 with the enactment of Assembly Bill 1890. The bill implemented retail competition in March 1998 and froze rates (subject to certain conditions) for 4 years at June 1996 levels. It also created an independent system operator to ensure fair and impartial access to the transmission grid by all generators, and a power exchange to serve as an auction market for trading in electricity. Both became operational in March 1998. The promise of this system was tested during the hot summer of 2000, when rolling blackouts and price spikes afflicted parts of the State. The high prices have been attributed to lack of generating capacity and market design deficiencies.
As the pressures of competition intensify, investor-owned utilities (IOUs) have sought competitive advantage through a wave of mergers, acquisitions, and divestitures. Thirty-five mergers involving IOUs have taken place since 1992 and an additional 12 are pending. The size of IOUs has consequently increased. In 1992 the 10 largest owned 36 percent of total IOU-held generating capacity, but by the end of 2000 the 10 largest IOUs will own an estimated 51 percent of that capacity. At the same time, however, IOUs are divesting themselves of substantial generation capacity. The result is that the role of electric utilities as providers of electric power is shrinking while that of nonutilities grows.
The Changing Structure of the Electric Power Industry 2000: An Update, DOE/EIA-0562(00); 166 pages, 21 tables, 33 figures.
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File last modified: November 17, 2000