Rates Going Through the Roof in Deregulated States

March 24, 2006
Citizens' Utility Board of Oregon

Thank goodness we're not paying Maryland's electric bills here in Oregon. Due to deregulation of the electricity industry, Maryland ratepayers are expected to see a 72% increase in their electricity bills this summer, when a temporary price cap disappears. According to the Baltimore Sun on 03/22/06, "The 72 percent rate hike scheduled to take place July 1 would cost residential consumers of BGE $750 million—an average of $740 a year for the company's more than 1 million customers in Maryland." Those customers will be at the mercy of the market, and—contrary to what the deregulation proponents claimed—the market has gone up, not down.

Customers of Pacific Power here in Oregon are currently paying a little over $.06 per kilowatt hour (kWh) for electricity, Portland General Electric customers about $.08. Maryland customers could be paying as much as $.15/kWh by year's end.

This result is consistent with what we're seeing in other states such as Pennsylvania who deregulated their system and sold off their generation facilities. The free market philosophy suggested that giving the customers more choice and the electricity-generating companies more latitude would result in a better deal for customers. It hasn't exactly worked out that way.

Temporary price caps implemented during the transition to a deregulated system were supposed to make way for prices lowered by the competition of the free market. Instead, "caps that are expiring now are 'coming off at a time when the wholesale market is way out of line with what had been expected. The real question is whether this is going to get better or not.'" Associated Press on AOL 03/08/06. And "in Montana, higher rates have led to a move to scrap the deregulation plan that originally was viewed as an avenue to cheaper electricity."

This could have been happening here in Oregon, quite easily. As one of its first acts after buying PGE in 1997, Enron proposed a radical deregulation scheme for Oregon. CUB built a coalition of Oregon's environmental, low-income, and other consumer advocacy organizations to fight Enron's plan, and we succeeded. This happened only a few years before the West Coast Energy Crisis, and it has been said that by redirecting Enron's push for change toward a restructuring plan that gave industrial customers some of the flexibility they wanted, while still retaining rate regulation for residential customers, we saved ratepayers an estimated one billion dollars. In addition, we won critical energy efficiency and renewable programs, and programs that protect low-income Oregonians' access to service. Oregon wound up with a system that not only looked better on paper, but has actually functioned more successfully in the real world.

So thank goodness and thank the CUB members who supported that work: Oregonians may see modest increases in electricity rates as fuel costs go up, but we aren’t sitting around trying to cut $750 out of next year's budget, knowing it will have to go to pay our electricity bill. That's a success story.

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