Analysis Pins Higher Retail Electricity Costs on Deregulation

A recent article in the New York Times that analyzed retail electricity costs in the states with deregulated markets vs. the states with regulated markets found that costs have risen faster and remained higher for more than two decades in the deregulated states.

In the U.S., 35 states have electricity markets that are either partially or fully deregulated — that is, they have allowed separate companies to handle some or all aspects of the generation, transmission and retail distribution of electricity. Georgia, of course, remains one of the 15 states that have not deregulated its vertically integrated utility model.

The Times analysis — conducted by an energy researcher and consultant — found that, on average, retail ratepayers in a deregulated market pay $40 more per month for electricity than those in the states with a regulated market. The analysis also found that those higher rates date back as far as 1998, and that wholesale rates, too, tend to be higher in deregulated markets.

According to the article, one main reason for the higher rates in deregulated markets is that utilities must build out transmission infrastructure to carry electricity from far-flung generating locations, passing that cost along to ratepayers without much oversight by regulators.

The push toward deregulation gained steam in the 1990s, disrupting the traditional regulated monopoly model of vertically integrated electric utilities. The grand idea underpinning the push toward deregulation was that increased competition would lead to cheaper electricity.

Instead, not only have rates increased faster in deregulated markets, but numerous systemic failures have also happened in these deregulated markets. Most notably in recent years, both California and Texas have suffered through blackouts and weather-related outages on a massive scale.

The NYT article is titled: “Why Are Energy Prices So High? Some Experts Blame Deregulation.” Subscribers can access the full article here.