Lights go dim for electricity deregulation

April 2, 2006
Chicago Tribune
Paul Adams

Lawmakers across the nation are contending power generators, not consumers, benefited

The electric deregulation juggernaut that swept the nation in the late 1990s has been replaced by a consumer backlash against energy price increases that threatens to reverse free-market reforms.

Lawmakers from Maryland to Illinois now worry that the deregulation movement they once embraced has failed to deliver the benefits they promised to constituents.

Already, about one-third of the 23 states that passed restructuring laws have revisited or delayed those plans, and some--including New Mexico, Arkansas and Nevada--have passed legislation repealing earlier deregulation laws.

Some, like Michigan, deregulated in a way that resulted in smaller rate increases, while others are still operating under rate caps put in place years ago and haven't yet felt the effects of unfettered markets. A similar rate cap extension was implemented in Ohio last year as a means of postponing rate increases.

In Illinois, lawmakers are considering a plan to extend rate caps for several more years in anticipation of rate hikes this fall, when utilities are set to hold energy auctions to replace expiring power supply contracts.

Illinois Gov. Rod Blagojevich wrote to utility commissioners last summer, saying that approval of a plan to allow two utilities to hold reverse energy auctions to procure power supply as part of the move toward free markets would be tantamount to "gross incompetence."

As one industry expert put it, the number of people who now say they opposed deregulation is akin to the number of baseball fans who later claimed to have been at Wrigley Field during the 1932 World Series when Babe Ruth famously pointed his bat to the center field bleachers before smacking a home run.

"It was probably 10 times the number of people who could fit in Wrigley Field," said Kenneth Rose, an independent energy consultant who has studied deregulation.

Shouted down

Proponents of deregulation say the consumer and political angst is an overreaction to rising global energy prices that have clouded the debate over whether free-market reforms have benefited consumers.

But those voices have been increasingly shouted down by lawmakers, academic scholars and some regulators, who are raising questions about whether complex rules governing wholesale power markets are structured in a way that does more to line the pockets of power generators than save money for ratepayers.

The debate directly challenges the contention of electric industry officials and others who say that rate increases sweeping the nation are solely the result of rising fuel prices and are not exacerbated by the rules creating free markets. Such claims have bolstered consumer watchdogs who say states would be better off if they hadn't deregulated.

'Cooked up by Enron'

"Deregulation was an experiment, a theory, cooked up by Enron and other lobbyists," said Tyson Slocum, director of the energy program at Public Citizen, a consumer group founded by Ralph Nader.

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