by Michael K. Block and Thomas M. Lenard
April 1998

During the last 20 years, competition has been replacing regulation in major sectors of the American economy, including transportation, natural gas and telecommunications. In each of these industries, the development of competition has followed its own path. In all cases, however, competition has been facilitated by the growing realization that, where any reasonable possibility of competition exists, economic regulation is an imperfect mechanism that generally does not serve the interests of the consumers it is intended to protect — that regulation generally has kept prices high and masked inefficiencies that are costly to the economy.

The movement toward competition has now begun in the electric power industry. It is a world-wide phenomenon. Where government ownership is the prevailing industry structure — which it is in most countries — this movement has taken the form of privatization of the industry’s assets. In recent years, a number of countries, including the United Kingdom, New Zealand, Norway, Chile and Argentina have taken significant steps toward privatizing and introducing competition into their electric power industries.

The United States, home to one-third of the world’s installed electric energy capacity, faces a somewhat different problem. While the U.S. has a significant public power sector, most of the power industry is in private hands. Investor-owned utility (IOU) assets are in excess of $500 billion and revenues of the electric power industry total about $200 billion annually. But while the bulk of the power industry in the U.S. is private, the market is not yet competitive, because the power companies historically have been regulated as franchise monopolies. As is the case with government-owned systems, the introduction of competition in the U.S. offers the promise of billions of dollars annually in economic benefits. This volume charts a path to that better future.

Deregulating Electricity: The Federal Role is available for $29.95. You can order this publication online here, or by contacting us at 202-289-8928.