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March 2005 IBEW Journal

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One of Marylands top utilities, Pepco, has asked state regulators to allow it to increase rates 21 percent.


Market-based rates hit Massachusetts residents on March 1 and prices for most customers are expected to increase by more than 7 percent. The states 1998 deregulation law mandates that rates be set every six months based on the market price of electricity. Before March 1, customers could opt for regulated rates.


Many states that instituted utility deregulation in the late 1990s placed artificial caps on consumer prices to allow competition to develop. The theory held that eventually competition would drive down electricity prices. But not enough merchant power producers have emerged for meaningful competition. Ohio, Illinois and Pennsylvania are among the states viewing the lifting of retail prices with trepidation.

Consumer advocates in Ohio are protesting rate stabilization plans, which they maintain are too high and include surcharges to allow utilities to repay old debts. Ohio Power, a utility owned by American Electric Power, is seeking a 28 percent increase in its generation rates. Last November, the state Public Utilities Commission approved a 2006 increase that will hike residential rates for Cincinnati Gas and Electric customers 20 percent. "The utilities are asking for mammoth increases and three years from now, well be no better off," Ohio Consumers Counsel Jane Migden-Ostrander told The Wall Street Journal.

Toledo Local 245 Business Manager Larry Tscherne said deregulation has been a much better deal for companies than for consumers. "Its been real beneficial to utility companies all the way across, especially in terms of stranded costs," Tscherne said of the capital costs utilities transitioning to deregulation are allowed to recoup from customers.

Now, even large industrial electricity customerswho were among the earliest proponents of deregulationare also balking at the states 4-year-old restructuring laws, said state Sen. Robert Shuler, who also initially supported them. Some are advocating re-regulation to maintain availability and stable prices. "Its too soon to say it has failed, but I also think that this point it is not progressing as anticipated," he said.


The 8-year Illinois rate freeze ends in two years, but ComEd is reportedly planning to petition the Illinois Commerce Commission for a 12-15 percent rate increase for electricity this year, requested for maintenance and continuing system reliability. The rate system has been frozen since the Illinois Electric Service Customer Choice and Rate Relief Law went to effect in 1997.


In the nine years since Pennsylvania deregulated its electricity market, the state has fewer choices of suppliers and no more of the initial discounts that had been offered to consumers.

"Now, choices dont really exist unless you want to pay moreso people arent making much of an effort," said David Hughes from the consumer group Citizen Power.

Power prices have risen in recent years due to higher gas and coal prices.


About one in five Texans have switched power providers since deregulation began three years ago, many for lower rates offered by a competitive field of marketers.

But the same state that brought us Enron has now offered up a $2 million scandal at the state agency charged with the keeping the electricity flowing. Six former officials at the Electric Reliability Council of Texas (ERCOT) have been charged with stealing $2 million from the organization by creating phony consulting and security companies that billed for work that was never performed. ERCOT is financed by electricity consumers through a fee on their utility bills.

The managers who prosecutors say received between $100,000 and $800,000 each, were charged with organized criminal activity, commercial bribery and theft by receiving stolen property.

In a statement, the Texas reliability council leader said from now on, the organization plans to "strengthen internal controls, monitor and enforce policies and develop a control consciousness as part of the ERCOT corporate culture."


A vocal and active coalition of labor unions, utilities and consumer groups has succeeded in slowing the progress of deregulations march across the Midwest into Wisconsin. But that has not stopped trends, including a looming utility worker shortage, from moving in.

"We are not making widgetswe have an obligation to provide safe and reliable gas and electricity service that is vital to the functioning of modern society," said Madison Local 2304 Business Manager Dave Poklinkoski, pointing out the industrys obligation to "stakeholders," not just shareholders. "Where are we to go, starting today, for the industry of tomorrow?"

Americans are still paying the high cost of the failed theory of deregulation, Hunter said, and the possibility for more blackouts, brownouts and market manipulations remains dangerously likely, especially with Californias bizarre new interest in it. At the 1997 Utility Conference, an Enron official told the IBEW to get on board the deregulation train because it was leaving the station. As we chug by the wreck of the derailed engine, have we learned anything?

(This is the first of a two-part series on deregulation.  In April, we will investigate the utility industry's worker shortage.)

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