Congress is considering retail electricity decontrol this session and recently got some practical advice from the gas pipeline industry, which has been transformed by deregulation in the last decade.
Last year, the Federal Energy Regulatory Commission ordered the utilities it regulates to open their transmission lines to all participants in the wholesale market, and predicted the action will save consumers up to $5.4 billion/year.
It's uncertain whether there will be enough pressure to force Congress to decontrol retail markets, which states regulate. The Edison Electric Institute said real electricity prices have dropped 27% in the past 15 years and continue on a downward trend.
Converging markets
Larry Hall, chairman and CEO of KN Energy Inc. and Interstate Natural Gas Association chairman, told a recent Senate energy committee workshop that the gas and electric markets are demanding greater efficiencies and flexibility, and are converging to create a competitive BTU market.
He said gas pipeline deregulation has improved reliability and saved consumers $90 billion over the past 10 years. "We should expect similar results from restructuring and deregulation of the electric power market.
"KN's experience with retail gas unbundling and gas pipeline deregulation has taught us several important lessons about moving from a regulated to a competitive market.
"As gas and electricity markets converge, and we move from an electron and molecule energy system to a BTU energy system, it will be critical that neither gas nor electricity receive an artificial competitive advantage because of government regulation.
"We cannot have a national electric market governed by 50 different states with 50 different standards and 50 different agendas."
He said consumers should be allowed to choose and switch power suppliers; Congress should end environmental rules that favor generation fuels and facilities; and electricity transmission should be priced so consumers choose on the basis of the delivered cost of the power, not just the generation cost.
Enron's views
Jeffrey Skilling, Enron Corp. president and CEO, said his firm has entered the wholesale electricity market and sees great potential for savings in the consumer electricity market.
"Today's system of providing electricity to American homes and businesses is a relic. It is a product of decades of protectionism that allowed monopoly utilities to supply services without having to meet the demands of competition.
"That system has certainly served the interests of the utilities, but there is now overwhelming evidence that consumers are on the losing end of this arrangement.
"To give you an idea of the distortion in the electricity market, consider that bulk or wholesale electricity calls for, on average, 2¢/kw-hr. Yet consumers pay anywhere from three to eight times this amount. There is no rational basis for that kind of markup. It would never be tolerated in any other business."
Copyright 1997 Oil & Gas Journal. All Rights Reserved.
