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.