More States Climb On Electric Deregulation Bandwagon
By Bair S Walker , Senior Writer
Arkansas, New Jersey, New Mexico, Maryland, Ohio, Texas, Virginia and Delaware passed laws in 1999 that deregulate their electric utilities, bringing to 23 the number of states that now embrace the policy. But not everyone is ready to take the leap. Nebraska Gov. Mike Johanns appeared before Congress to state his misgivings about opening his state's electric industry to retail competition.
The eight states that acted join Arizona, California, Connecticut, Illinois, Massachusetts, New Hampshire, Nevada, New York, Maine, Michigan, Montana, Oklahoma, Pennsylvania, Rhode Island and Vermont on the electric deregulation bandwagon.
Deregulation came to Ohio's $11 billion dollar electric power business earlier this month when Gov. Bob Taft signed a bill that phases in deregulation beginning Jan. 1, 2001. Under Ohio's new electric utility restructuring law, residential consumers get a 5 percent rate cut, followed by a five-year rate freeze.
Texas lawmakers passed a bill last month that restructured the state's $19 billion electric utility industry. Gov. George W. Bush signed the measure soon afterward.
When the law takes effect there in 2002, a 6 percent reduction will be required for residential and small business electricity consumers, along with a three-year rate freeze.
Maryland acted in April, when legislators signed off on an intricate, 73-page bill that few of the 141 delegates and 47 senators who voted on it admitted to having read. It's designed to deliver a 3 percent rate decrease to residential customers.
"This is the toughest issue I have seen in 21 years," Democratic Sen. Thomas L. Bromwell, who helped craft the legislation, told the Baltimore Sun .
Signed into law by Gov. Parris N. Glendening, Maryland's plan allows residents to begin shopping for new electricity suppliers July 1, 2000, while businesses have to wait until Jan. 1, 2001.
New Mexico opted to open its electric industry to retail competition the same month Maryland did. New Mexico's plan gives small businesses and residential customers first crack at the benefits of electric deregulation beginning 2001. All other consumers become eligible the following year.
In March, Virginia's General Assembly passed a bill phasing Virginia electricity consumers into a deregulation scheme between 2002 and 2004. A unique wrinkle of Virginia's measure calls for the formation of a regional entity that to oversee electric transmission, which many experts say may become problematic under deregulation.
Also in March, Delaware Gov. Thomas Carper signed House Bill 10 -- Delaware's Electric Restructuring Act -- into law. It starts phasing in retail competition in October and is to be completed by April 2001. Residential customers are supposed to get a 7.5 percent rate cut under the program.
Delaware's conversion came on the heels of New Jersey's, where Gov. Christie Whitman uttered, "Okay, let the competition begin," after signing a bill in February to restructure the Garden State's $10 billion electric utility industry.
New Jersey's deal gives consumers a 5 percent electric rate discount beginning next month and at least another 5 percent over the next three years. A change to New Jersey's energy tax was designed to save state residents an additional 6 percent over the next four years, making for a total potential discount of 16 percent.
It's no coincidence that three states in close proximity to each other -- Virginia, Maryland and Delaware -- all passed electric restructuring laws this year. In addition to being seen as a potential boon for electricity consumers, deregulation is increasingly viewed as an economic development carrot for wooing relocating corporations.
The same kind of pressure is being felt in Michigan, which borders two economic powerhouses -- Illinois and Ohio -- that have already restructured.
As a result, Michigan now has the most expensive electric rates in the Midwest. Its public service commission has already laid the regulatory framework for deregulation, but doesn't have the authority to introduce the policy. That may take place officially in the fall, when the legislature returns from recess to confront several restructuring bills.
Not all states view the introduction of electric utility deregulation, also known as retail wheeling, as desirable. Nor does a U.S. Agriculture Department study predicting deregulation will bring rate cuts to 26 states, but might actually lead to increases in 19 others, including Nebraska.
Armed with that information, Nebraska Gov. Mike Johanns traveled to Washington last month to tell a Senate committee that electric deregulation "could have a very profound impact on Nebraska."
Nebraska is the only state in the nation without public power companies. Its electric utilities are either owned by members of cooperatives, or by the public.
The USDA report, which was quickly downplayed by the Clinton administration, said that electric rates would rise in the Pacific Northwest, Mountain states, Mid-South, northern Plains and in some Great Lakes states with the advent of deregulation.
The Southwest, Northeast and southern Plain were cited as areas that would have lower electric bills.
Illinois, which passed a deregulation bill in 1997, enacted new restructuring legislation in June that makes October the new deadline for industrial customers to reaping the benefits of retail competition.
After much study and deliberation, Arizona in April announced that 20 percent of its residents would be allowed to enter the world of retail competition this year, with everyone else coming on board by Jan. 1, 2001.
Arizona, which enacted its deregulation law in 1998, had been in a holding pattern until pricing, market structure and stranded costs -- the billions of dollars paid to utilities to compensate them for past investments -- could be determined.
Arkansas also made the move to shift to retail competition in April, when Gov. Mike Huckabee signed a bill ushering in deregulation by 2002. That deadline is in keeping with the advice of an independent consultant hired by the state.
He told legislators not to deregulate Arkansas's $2 billion electric power industry for at least two years, so that deregulation can be studied more thoroughly.
Louisiana's top regulator stated in February that deregulation is a bad idea, because it could result in higher electric bills for residential consumers. Not surprisingly, Louisiana is studying all the issues associated with retail competition through August 2000.
In Massachusetts, where deregulation is up and running, innovation evolved into a boondoggle. Massachusetts revealed that a toll-free hotline established to tell consumers about deregulation plan was attracting few phone calls, but had cost the state $746,000 over a ten-month period.