westerngrid

Important new article providing assessment of US experience with deregulated electricity markets by current FERC Commissioner @ChristieFERC Through a series of Orders starting in late 1970s FERC enabled the introduction of competition, the creation of (inter-state) regional transmission organizations (RTOs) and encouraged the "deregulation" of vertically-integrated utilities via which States transferred their jurisdiction (uploaded) over wholesale prices to FERC. Not all States deregulated, creating a "natural experiment" to evaluate performance, which Christie summarizes: "there is persuasive evidence that deregulation provided no real cost savings to consumers; indeed, the empirical data available suggests that it actually has made power more costly for consumers in deregulated states. Data...has consistently showed a general pattern of higher residential electricity rates in most RTO states than in non-RTO states." Christie highlights that seeing the evidence some states reversed course: e.g. after initially deregulating, in 2007 Virginia returned to "a vertically-integrated, cost-of-service model, albeit within an RTO, with utilities still owning generation assets". BTW, Christie was a Commissioner at the Virginia PUC from 2004 to 2021. Christie advocates for a "thorough reconsideration of the pricing mechanisms used in all of our RTO power markets. FERC, as the creator and regulator of RTOs and their markets, should lead it. These pricing mechanisms are part of the legacy of deregulation, and a thorough reconsideration should logically examine whether the assumptions that underpinned deregulation are still valid, if they ever were." THEY NEVER WERE. As @nukebarbarian @AmericanAffrs article noted las year "the policy vision for deregulation was built on sand.” "Deregulation was supported by greens" like the NRDC and RMI "that wanted more wind and solar" and economists...both s"aw spot markets as a vital tool for dissolving the market power of utilities...But the major player in this reform was Enron... to make its arbitrage services profitable. Enron spent millions on lobbying and political campaigns in support of deregulation" “Electricity deregulation happened not only because there was sufficient consensus, but because Enron had the political and financial muscle to make it happen.” "What began as a drive to make room for the little guy and reduce prices through decentralization has instead resulted in a byzantine system of rules and regulations overseen by the federal government and negotiated by insiders far from the public eye." It is refreshing to see a @FERC Commisioner look at the evidence and go on the record calling for a re-examination of dergualtion in the US. It probably takes someone who has gone through the process of reversing course to do it..... Here in Canada only one province in ten, Alberta, maintains a deregulated electricity market; my province of Ontario had one for a few months in 2002 and quickly "reversed course", abandoning most elements of its core elements. Overall, we have less self-inflicted damage to recover from... But Christie and other deregulation "critical or sceptical" policy-makers in the US have their work cut out for them... as Emmet notes “It is not clear how the [US] grid can be fixed. Various universities, utilities, NGOs, major financial institutions, politicians, and industry interests have too much at stake to turn back now....The political force that could meet the challenge of fixing the American grid would have to be both powerful enough and competent enough to achieve its aims.”