More than a decade ago, at the 1981 Edison Electric Institute (EEI) Fall Financial Conference in Palm Beach, FL, I presented my vision of the future of the electric industry. I called my talk "Let's End the Monopoly." In it I urged, "Let's open electricity generation to competition (em with free entry, no franchises, and no obligation to serve." The response was underwhelming.
From the perspective of the last 14 years, how have my forecasts turned out?
Imagine you're the principal energy buyer for a national chain of managed health care centers, with a $200-million annual energy tab. Top management asks you to assess how the chain can cut its energy bills.
You turn to your local electric and gas utility, which talks a lot about customer service, but doesn't have much to show for it yet.
Our 13th annual electric rate-case survey covers electric rate orders issued between
April 1, 1994, and March 31, 1995.
The survey tabulates rates of return on common equity (ROE) approved by state public utility commissions (PUCs) in major electric rate orders, but also includes some cases in which rate of return was not directly at issue, or where a rate adjustment resulted from a settlement agreement.
The structure of the utility and telecommunications industries has changed significantly since I began my role as a regulator 15 years ago. Technological developments and a competitive environment, as opposed to regulation, have provided the major catalyst for change. As a result, utility companies, which have historically enjoyed the favor of Wall Street investors, will soon face unprecedented revenue growth problems.
B. Jeanine Hull
President, Electric Generation Association
Vice President & General Counsel, LG&E Power Inc.
PURPA is not the issue; competition is. PURPA has introduced competition by demonstrating that the generation of electricity is not a natural monopoly. PURPA's faith in competition has proven itself in the form of lower-priced electricity for ratepayers. PURPA has also promoted fuel diversity by creating incentives for utilities to consider renewable fuel options for portions of their capacity needs.
Randall Hardy
Administrator
Bonneville Power Administration
BPA's central role in the Northwest has no counterpart among the other PMAs proposed for privatization. We hold approximately 45 percent of the market share, serve 85 percent of our customers' load, and provide rate benefits for 85 percent of all Northwest residential consumers.
By contrast, the other PMAs have less than 10 percent of the market in their respective regions.
Donald Pardus
Chairman & CEO
Eastern Utilities Associates
Eastern Utilities is committed to creating a company and a culture that goes beyond just delivering electricity. Our primary goal is to compete not just on price but on the value of the total service provided. Customers are the driving force in any competitive marketplace, and our commitment to our present and future customers is to deliver services that the customer values and needs.
In our vision of the future, today's distribution function will be divided into two companies (em a poles and wire function and a merchant function. The merchant company would provide value-added products and services to the customer. We have used credit cards, branding, and other marketing gimmicks to sell our services, particularly demand-side management (DSM). In the future, however, I think there will be greater emphasis on the types of energy-purchasing alternatives we provide. Pricing options are one offering that we would expect to expand.
My subject today is regulation and competition in the electric utility industry.
You all know only too well what's happened to this industry in the last decade or so: Inflation accelerated, interest rates rose, productivity growth slowed, fuel prices rose dramatically, growth in demand stopped, and the cost of meeting environmental and safety regulations soared. For utilities that was truly a devil's brew.
It was after seven o'clock in the evening (em nearly 12 hours since the DOE-NARUC Second National Electricity Forum had gotten underway up in Providence, RI (em when it all finally hit home. This time the regulators were serious. People were paying attention.
