Electricity Deregulation in the United States

Regardless of geographical location, the pillars of electricity generation policy in the United States have remained one of the constants in American life since the 1930s.

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Usually a local, state or federal government agency owned and operated your local electric utility. If a government agency did not own the utility, i.e., the utility was an investor owned utility (IOU), it was still heavily regulated by government, including regulation over the price that the utility could charge for its services. Whichever way ownership was structured, the electricity market stood as a series of independent local public sector monopolies, each responsible for the majority of electricity generation and transmission in the area they served.

As time moved forward, public utilities expanded horizontally and vertically because more of rural America hooked up to an electric grid and already established urban electric grids changed in response to population and economic trends. What's known today as electricity restructuring refers to the economic organization of the electricity market. Public utilities are privatizing and electricity production is moving in a market direction, able to be purchased and traded from a new category of independent electricity producers as well as from traditional public utilities. Electricity transmission issues currently lag behind electricity generation privatization activity.

At first glance, seventy years might seem like a long time for any industry to maintain a basic organizational consistency. After all, we're in an information age that encourages people to think about the idea of change in seconds and minutes rather than decades. Success, as much as anything else, provides the best explanation underlying the public utility industry's decade's long stability. It worked.

It worked because its cornerstone principles, self-sufficiency and stability in electricity markets, served as the engine of United States economic growth. The self-sufficiency movement in electricity production came as part of Franklin D. Roosevelt's New Deal sustainable development program, part of which supported the construction and operation of large scale energy development projects such as the The Tennessee Valley Authority (TVA) and the Bonneville Power Administration (BPA).

This move toward self-sufficiency complimented a then evolving self-sufficient, some say isolationist, American foreign policy. Global economic depression and collapse of the U.S. stock market created much of the push away from an internationalist to a nationalist economic development policy. Smoot-Hawley, which erected tariff barriers as a means of greatly reducing or totally eliminating imports of goods into the United States rounded out the self-sufficiency policy by providing United States manufactures, now electricity secure, with an established market to sell their goods.

Although United States foreign policy moved in an internationalist direction following the end of WWII, electricity generation policy remained constant. Depending on demographic and environmental circumstances either the federal government, the state government, a local municipality or rural cooperative assumed primary responsibility for the generation and transmission of reliable electric services for rural and urban consumers and businesses. The model began showing signs of wear during the 1970s. Twin hikes in the price of oil led to price increases in all petroleum related products, including gasoline and oil generated electricity. Technological changes enabling electricity generation to move across long distances of transmission wires and the development of smaller and more energy efficient natural gas driven electricity turbines created a more competition friendly environment.

In instances of local resistance to competition friendly environments, the Federal Energy Regulatory Commission was delegated responsibility, by way of the Energy Policy Act (1992), to ordering the utilities to allow private electricity producers access to their markets. There's almost a fifty-fifty chance you're already participating in or are on the verge of participating in an electricity deregulation program. According to the Energy Information Agency (EIA), as of July 2000, 24 states and the District of Columbia either passed or implemented electricity deregulation legislation.

© 2001-2005. Patricia A. Michaels. All Rights Reserved.