What is Deregulation?
Currently, Arizona utilities are regulated either by the independently elected Arizona Corporation Commission or an independently elected governing board, under a "cost of service" model, which requires each utility to justify its rates based upon the capital investment they are making to provide service to their customers. This model keeps electricity prices stable for the consumer and ensures reliable power and capacity – especially during the hot summer seasons.
You may have heard of "deregulation" before – it was an effort that was tried in the late 1990's. Under a scheme of opening the wholesale power market to competitive power producers and providing customers with choice, several states implemented deregulation with disastrous results including out of control prices for consumers and a dramatic increase in customer complaints.
How does deregulation impact residential consumers and small businesses?
Deregulation hurts residential and small businesses – leaving them holding the bag. These new merchant energy companies typically operate like hedge funds, hoping to cherry-pick the biggest purchasers of electricity and give them a lower rate but lacking the incentive to provide reliable power to a broad base of consumers. Residential and small business consumers will very likely suffer in such a structure while large, commercial users will be promised benefits that may not materialize.
How does deregulation impact reliability?
These out of state merchants are not proven partners within the community and will bear little responsibility for disruptions of power or reliability of service. They have no responsibility for transmission or service reliability. They add no value and no actual competitive dynamics to the production and delivery of power. They do not propose to create a real market, but rather to simply extract profits from a system they have not invested to build and bear no responsibility for maintaining.
Would deregulation offer anything new?
No. Like the old long distance providers, they are really just offering incentives to switch and complicated plans filled with fine print leaving customers confused and unhappy.
What about Arizona's current system?
Arizona's current system is reliable, keeps prices stable and will deliver real energy innovation. Arizona residents already enjoy below-average energy costs. Most states that have chosen to experiment with electric deregulation faced significantly higher rates. Arizona's current system is constantly innovating – providing customers a great deal of choice and reliability, while keeping prices stable and low. When it comes to long term energy innovation, we should count on the companies who are invested in Arizona and here to stay. They're the ones who will invest in real research, technology and innovation, not the hedge fund buyers looking to make a quick profit and move on.
What happened in other states that have tried deregulation?
When they tried deregulation in California it was a complete disaster, leading to power shortages, blackouts and out of control pricing. It was so bad that the Arizona Corporation Commission halted the program in Arizona. It was demonstrated that ENRON and other companies were only manipulating the market to increase costs for power so they could make more money. After Maryland's freeze ended, consumer power rates increased 60%. In Illinois, rates jumped 55%. Rates increased as high as 53% in Pennsylvania. Customer service complaints increased 700% when Texas deregulated. Had residential prices kept to the national average after deregulation, Texans would have saved more than $22 billion between 2002 and 2012.
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