Electric Utility Deregulation Driven By Costs
By Bair S Walker , Senior Writer
The push among states to deregulate their electric utilities, triggered by federal laws passed in 1978 and 1992, has entered a second, more cautious phase.
Gone is the urgency shown by 18 states that embraced deregulation from 1996 through 1998. Most of those states, including New Jersey, the most recent convert, and Vermont, Maine, New York, Connecticut, New Hampshire, Rhode Island, Massachusetts, California, Arizona, Illinois, Michigan and Pennsylvania, have residential electric costs well above the national average of 8.43 cents per kilowatt hour.
A kilowatt hour is the amount of electricity needed to keep your television set going for roughly three hours.
Many states where electricity is cheaper prefer to watch and wait before deciding on deregulation, according to Matthew Brown, a National Conference of State Legislatures energy expert. "The complexion of the issue has changed, as we have moved from the most expensive states to the middle-cost states," says Brown, citing Colorado as an example.
Colorado, where residential consumers pay an average price of 7.42 cents per kilowatt hour, is clearly taking its time. A deregulation bill quietly died in the General Assembly last year, the third year in a row that's happened.
It's a different dynamic, there are different reasons for going ahead," says Brown. "States are looking at (deregulation) very carefully, they're being much more deliberative. And they can afford to be."
Seeking resolution, the Colorado General Assembly has created a panel that will decide once and for all if deregulation is in the state's best interests. A report is due before the turn-of-the-century.
"We have a 30-month study that we're in the middle of. I'm going to wait until the study is over, as will the Legislature, before we do anything on it," Republican Gov. Bill Owens told stateline.org.
In Louisiana, where residential consumers pay 7.39 cents per kilowatt hour, Public Service Commission analysts earlier this month issued a report claiming that deregulation could result in higher electric bills.
The analysts said that if PSC decided to proceed with deregulation, it should adopt a hybrid plan that would let large industrial users shop around for low-cost electricity, but limit the rates that smaller consumers could be charged.
Contrast Colorado and Louisiana to New Jersey, where residential consumers pay an average cost of 12.08 cents per kilowatt hour for electricity. Legislators in that state were so relieved to pass a deregulation bill in February that they cheered.
Texas is another middle-cost state that killed a deregulation bill last year, and will probably take another run at it. Residents in the Lone Star State pay an average of 7.82 cents per kilowatt hour, nearly a cent lower than the national average.
A spokesman for Enron, a large energy company based in Houston, says that Iowa -- where residents pay 8.21 cents per kilowatt hour -- recently crafted a deregulation bill.
Missouri, where electricity costs to residential consumers are 7.09 cents per kilowatt hour, is also taking a serious pass at deregulation, says Gary Foster, whose firm had $31 billion in 1998 revenue.
Ohio, where residents pay an average of 8.63 cents, is examining deregulation legislation, too.
Whether states rush to deregulate or approach the issue cautiously, eventually all of them will get on board, predicts Joan Walsh Cassedy, associate publisher of The Energy Daily.
"The fact is, this train is on a track and it's moving forward," says Cassedy.
"I don't think there's any putting the genie back in the bottle at this point."
Enron spokesman Foster agrees, and says one reason is competition between states. States with electric deregulation can offer businesses lower electric costs, and a possible economic development advantage over states without deregulation, he says.