As electricity prices declined in 1998, U.S. retail sales of electricity rose 2.5 percent and total net generation grew nearly 4 percent. Along with this robust performance, the electricity industry underwent significant change as further efforts toward retail competition were made in the States, additional futures markets began operating, and power exchanges and regional independent transmission system operators (ISOs) were launched. These trends are documented in Volume I of the Electric Power Annual 1998, recently released by the Energy Information Administration. The report examines developments in four areas:

U.S. Electric Power Industry Capability, Generation, Sales, and Prices, 1997 and 1998
Item	1997	1998
Capability (percent share)
Utility	91	88
Nonutility	9	12
Net Generation (billion kWh)
Utility	3,123	3,212
Nonutility	372	4071
Total	3,494	3,620
Retail Sales (billion kWh)	3,140	3,220
Retail Prices (cents/kWh)	6.85	6.75
1Estimated. Notes: kWh=kilowatthours. Totals may not equal sum of components due to independent rounding. Source: Energy Information Administration

Electricity production. The shares of total generating capability (779 gigawatts as of January 1, 1998) shifted significantly between the utility and nonutility sectors from 1997 to 1998 (see table). By the end of 1998, nonutilities owned 45 percent or more of statewide generating capability in four States, including California. To keep pace with rising electricity demand, generation increased from all sources except renewables. Petroleum-fired utility generation increased the most, soaring over 40 percent, reflecting a sharp drop in fuel costs.

Market transactions. The national average price of electricity sold by utilities in 1998 fell 1.5 percent compared with 1997, the result of lower fossil-fuel costs and competition-driven rate reductions. Electricity demand rose in all major end-use sectors in 1998, mainly the result of warmer weather and strong economic growth.

Transmission. In response to Federal regulatory encouragement to separate the sale of electricity transmission services from generation, the industry set up independent system operators (ISOs) charged with the impartial operation of the 200,000 miles of high-voltage lines in the United States. Four new ISOs were launched in 1998: the Pennsylvania-New Jersey-Maryland ISO, the California ISO, the New England ISO, and the New York ISO. Two other ISOs were either conditionally approved or already operating by year's end.

Restructuring in the States. By the end of 1998, 18 States had either passed laws or issued regulatory orders to deregulate electric power and eventually allow retail customers to choose their electricity suppliers. California, where the transition to full competition is perhaps most advanced, opened its retail market to all consumers on March 31, 1998. At year's end, 18 percent of California's large industrial customers and 1 percent of its residential customers had opted for direct access.

Contact:

Dean Fennell, Office of Coal, Nuclear, Electric and Alternate Fuels

dean.fennell@eia.doe.gov

Phone: (202) 426-1157

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File last modified: June 25, 1999