The American Gas Association reports that U.S. electric industry restructuring will result in an average decrease of 14% in real electricity prices by 2015.
The AGA study projected electricity prices (residential, commercial, industrial) to 2015 by state, region, and sector in a restructured market.
It concluded that the effect on prices would vary significantly, depending on the type of customer and location. It said that, in some locations, electricity consumers could have stable or increasing real electricity prices.
Lower power prices
Paul Wilkinson, AGA vice-president for policy analysis, said, "This study indicates a strong downward pressure on electricity prices in a restructured market, particularly in the industrial sector.
"This is similar to what we have seen in a restructured natural gas market.
"It is interesting to note that the price declines projected in this study for electricity are very similar to those which we have independently forecast for natural gas over the same time frame," Wilkinson said.
The study said real electricity prices are projected to fall by an average of 14% from 1996 to 2015.
Greater declines, of about 25%, are expected in high-cost states (California, much of New England, and the Mid-Atlantic region), while prices are expected to stay flat or modestly increase in relatively low-cost states (Southeast and Pacific Northwest).
Real price declines in the industrial sector will be greater than those in the residential and commercial sectors-26% vs. 9-10%. Price declines in the high-cost states will be greatest when stranded-cost recovery ends, from 2005 to 2010.
The AGA study also addressed a number of nonprice issues, such as who will be the likely "winners" and "losers" in a restructured market.
It also examined the outlook for changes in the electricity generating mix as well as potential changes in system reliability.
Science Applications International Corp., McLean, Va., prepared the study for AGA.
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