More ruminations on the "stranded ratepayer."
James Haines is President and CEO of El Paso Electric. Richard D. Cudahy is a Judge for the U.S. Court of Appeals for the Seventh Circuit in Chicago, Illinois.
In "Stranded Ratepayers? I Respectfully Disagree" (June 1, 2001, p. 14), Alfred Kahn observes: "The movement [to electricity deregulation] became powerful only during the period in the middle and late 1990s and only in those jurisdictions in which ... regulated rates, based on book costs, appeared to be far above competitive levels. At those times, and in those places, it was not the utility companies, but regulators and legislators who began to insist on deregulation." Kahn's observation is accurate, but in my view, requires a footnote.
The seeds of competition were sown, ironically, in the 1970s — a period in which, as Kahn notes, "regulation held rates markedly below what would have been competitive levels." In that period, many utility commissions allocated costs, perhaps arbitrarily and at least novelly, to shift a disproportionate share of rate increases to large industrial users. By the mid 1980s, for many reasons, that game was exhausted.