Structure of US electricity industry failing

6 December 2004 – The restructuring of the US electricity industry has failed to lower costs and has contributed to high profiled crises, according to a report published by the Cato Institute.

The report, Rethinking Electricity Restructuring, released by the public policy research foundation, called for present reforms to be abandoned in favour of more aggressive deregulation.

The authors, Peter Van Doren and Jerry Taylor have written that the electric utility restructuring of the 1990s, designed to remedy the problems caused by relatively high electricity costs in the Northeast and California, has created little price relief, led to many states adopting policies that encourage excess capacity, and failed to produce real time pricing.

According to Van Doren and Taylor, the grafting of a deregulated wholesale market onto a still regulated retail service is an unwieldy marriage that has created an economic confusion and led to the establishment of “artificial market institutions that invite manipulation and abuse.”

Van Doren and Taylor have suggested that if it becomes politically unviable to embark on a more thorough embrace of the markets, a preferred alternative should be a return to an updated version of the previous vertically integrated, regulated status quo.