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Beyond the Crossroads: The Future Direction of Power Industry Restructuring

DEREGULATION TO DATE SHOWS SAVINGS, BUT PRESSING ISSUES REMAIN

The US power sector continues to face uncertainty about whether electric power policy will move the industry toward a continued course of restructuring or a return to regulation. Despite misperceptions such as the impacts of restructuring on power prices, stakeholders must act now to resolve some of the pressing policy issues facing the industry.

  • Contrary to conventional wisdom, CERA finds that US residential electric customers paid about $34 billion less for the electricity they consumed over the past seven years than they would have paid if traditional regulation had continued.
  • Power markets are complex, and there are multiple factors on which to measure progress. After a decade of power industry restructuring, the US power sector gets only a C+ grade for deregulation implementation.
  • Resource adequacy is the most pressing problem in the US power sector today. This study identifies different mechanisms to address resource adequacy that are currently evolving; none is a one-size-fits-all solution, but some clearly have the potential to work while others do not.
  • Creating a robust transmission grid is necessary to ensure reliability, reduce customer costs, and promote fuel diversity and environmental goals. However, the problem of chronic underinvestment in transmission infrastructure needs to be solved.
  • Stabilizing the power industry’s new hybrid state of regulation/competition requires more fact-based decision making, regionalized approaches to resolving federal and state conflicts, and recognition that policy changes need to be tailored to the varied models that have evolved in the power sector.

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Full Report (98 pages) Full Report (98 pages) (Client Only)
Tables (6) Tables (6) (Client Only)
Figure I-1: US Average Real Power Price Indices Figure I-1: US Average Real Power Price Indices (Client Only)
Figure I-2: Real Residential Prices of Electricity Figure I-2: Real Residential Prices of Electricity (Client Only)
Figure I-3: Changes in the North American Electric Power Industry Structure Figure I-3: Changes in the North American Electric Power Industry Structure (Client Only)
Figure I-4: Conventional Wisdom on Deregulation Figure I-4: Conventional Wisdom on Deregulation (Client Only)
Figure I-5: Crude Oil Prices in Nominal and Real US Dollars, 1970–2005 Figure I-5: Crude Oil Prices in Nominal and Real US Dollars, 1970–2005 (Client Only)
Figure I-6: Nominal Residential Prices of Electricity Figure I-6: Nominal Residential Prices of Electricity (Client Only)
Figure I-7: Producer Price Index: Finished Products Figure I-7: Producer Price Index: Finished Products (Client Only)
Figure I-8: Electric Utility Industrial Rates, 1996 Figure I-8: Electric Utility Industrial Rates, 1996 (Client Only)
Figure I-9: Fuel Costs for Electricity Generation, 1992–2003 Figure I-9: Fuel Costs for Electricity Generation, 1992–2003 (Client Only)
Figure I-10: Historical US Reserve Margins, 1970–2004 Figure I-10: Historical US Reserve Margins, 1970–2004 (Client Only)
Figure I-11: US Capacity Additions, 1950–2005 Figure I-11: US Capacity Additions, 1950–2005 (Client Only)
Figure I-12: Northeast Retail Real Power Price Index Figure I-12: Northeast Retail Real Power Price Index (Client Only)
Figure I-13: Midwest Retail Real Power Price Index Figure I-13: Midwest Retail Real Power Price Index (Client Only)
Figure I-14: South Retail Real Power Price Index Figure I-14: South Retail Real Power Price Index (Client Only)
Figure I-15: West Retail Real Power Price Index Figure I-15: West Retail Real Power Price Index (Client Only)
Figure I-16: Deregulation and Residential Prices, 1997–2004 Figure I-16: Deregulation and Residential Prices, 1997–2004 (Client Only)
Figure I-17: Cumulative Deregulation Savings, 1997–2004 Figure I-17: Cumulative Deregulation Savings, 1997–2004 (Client Only)
Figure A-1: US Bureau of Labor Statistics Consumer Price Index Regions Figure A-1: US Bureau of Labor Statistics Consumer Price Index Regions (Client Only)
Figure A-2: US Electric Value Chain, 2003 Figure A-2: US Electric Value Chain, 2003 (Client Only)
Figure II-1: CERA April 2002 Recommendations Figure II-1: CERA April 2002 Recommendations (Client Only)
Figure II-2: Operating RTOs Figure II-2: Operating RTOs (Client Only)
Figure II-3: Trend in Annual Congestion Cost Figure II-3: Trend in Annual Congestion Cost (Client Only)
Figure II-4: RTO/ISO Functionality Scorecard Against Key Wholesale Market Platform Requirements Figure II-4: RTO/ISO Functionality Scorecard Against Key Wholesale Market Platform Requirements (Client Only)
Figure II-5: On-peak Weekly Average Spot Electricity Prices Figure II-5: On-peak Weekly Average Spot Electricity Prices (Client Only)
Figure II-6: Operating Regional Transmission Organizations (RTOs) with Capacity Market Auctions or Resource Adequacy Plans Figure II-6: Operating Regional Transmission Organizations (RTOs) with Capacity Market Auctions or Resource Adequacy Plans (Client Only)
Figure II-7: Status of Market Mechanisms for Congestion Figure II-7: Status of Market Mechanisms for Congestion (Client Only)
Figure II-8: Transmission Net Plant Investment by Region, 1998–2003 Figure II-8: Transmission Net Plant Investment by Region, 1998–2003 (Client Only)
Figure II-9: Milestones in Market Transparency Figure II-9: Milestones in Market Transparency (Client Only)
Figure II-10: State Electric Markets Fully Open to Retail Competition, 2004 Figure II-10: State Electric Markets Fully Open to Retail Competition, 2004 (Client Only)
Figure II-11: Rate Cap Expirations and Transition Period Extensions Figure II-11: Rate Cap Expirations and Transition Period Extensions (Client Only)
Figure II-12: Operating RTOs with Load Management Programs Figure II-12: Operating RTOs with Load Management Programs (Client Only)
Figure IV-1: The Resource Adequacy Spectrum Figure IV-1: The Resource Adequacy Spectrum (Client Only)
Figure IV-2: Potential Resource Adequacy Mechanisms: An Evaluation Figure IV-2: Potential Resource Adequacy Mechanisms: An Evaluation (Client Only)
Table of Contents
Beyond the Crossroads: The Future Direction of Power Industry Restructuring
 Full Report (98 pages) Full Report (98 pages) (Client Only)
Tables (6) Tables (6) (Client Only)
Figure I-1: US Average Real Power Price Indices Figure I-1: US Average Real Power Price Indices (Client Only)
Figure I-2: Real Residential Prices of Electricity Figure I-2: Real Residential Prices of Electricity (Client Only)
Figure I-3: Changes in the North American Electric Power Industry Structure Figure I-3: Changes in the North American Electric Power Industry Structure (Client Only)
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