The U.S. electric power industry: Regulatory trends and objectives

This paper examines recent trends and future prospects for continued change in the regulation of the electric power industry. Future procurement of supplies will rely more on competitive bidding, and this will require opening up access to the transmission grid. The paper outlines problems for both developments. Competitive bidding could be a useful tool if utilities can bargain hard with suppliers and if a large number of independent producers remain so as to discourage implicit price collusion. Allowing wholesale traders greater access to transmission could be accomplished if problems are addressed. Access guidelines and legal responsibilities must maintain the integrity of the grid. New transactions must increase efficiency and not just redistribute surplus from existing trades. Transmission services must be priced to provide an equitable division of gains between the wholesale traders and the wheeling utility's equity holders and native customers. Recommendations for regulatory guidelines are spelled out.