Electric Utility Deregulation and the Myths of the Energy Crisis

Abstract

Electricity deregulation was meant to improve the quality of people’s lives by lowering the cost of a critical commodity. In every state that has chosen deregulation, however, power companies, free from the oversight of state regulators, have increased prices and, in California’s case, have driven a utility to bankruptcy. It is clear that deregulation was intended to benefit the energy industry more than consumers by removing cost-based regulations that restricted corporate profits but guaranteed low prices and reliable service to consumers. Deregulation proponents argued that California’s commitment to strong air quality standards prevented development of adequate power plant construction and that not a single power plant was constructed in California in the 1990s. This claim is refuted through an examination of California Energy Commission data. Although other states’ experiences are not as dramatic as California’s, serious problems will emerge if deregulation continues to dominate the policy agenda.