March 2005 IBEW Journal
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.
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
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 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
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
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?