Electricity Reform in Colorado

Electricity Reform in Colorado

January 02, 1999

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Consumers in Colorado pay prices for electricity that are among the lowest in the country. Therefore, indeed they are to be forgiven for wondering "what all the fuss is about" over electricity deregulation. Yet there is plenty to fuss about. Even though Colorado faces low electric costs now, it must take charge of its fate and ensure that the state experiences even further gains by assuming the role of a leader in energy deregulation. Colorado can be a state that does things, rather than a state that things are done to.

The $212 billion electricity industry is the largest industrial monopoly left in the United States. Unlike when shopping for groceries, hardware or clothing, consumers dissatisfied with their electric service are stuck with the local power company.

Thanks to recent deregulation of telecommunications, natural gas and airlines and trucking-industries which had enjoyed governmental shielding from competition customers are recognizing that they owe no allegiance to artificial monopoly. Most states, including Colorado, have introduced legislation or regulation to bring retail competition to their markets.

To bring that competition about, federal and state reformers alike propose what is referred to as "forced open access," or "retail wheeling" as the model of reform. Under this approach, industrial, commercial and residential electricity customers would be allowed to select an alternative power company-much as they may choose among long distance telephone companies today. The local utility would be required, with compensation, to deliver the competitor's electricity to the homes and businesses of customers. Thus under forced open access, transmission and distribution of power remain regulated, monopoly functions of the local utility. Only pricing and entry for generation is deregulated under existing models.

Regrettably and paradoxically, the forced open access model requires enhanced regulation of the power grid, because someone will have to oversee all the unsolicited dumping of power into the grid. Plus, forced open access needlessly imposes "stranded" losses on existing utilities, who suddenly may be faced with a dearth of customers. Coupled with Colorado's low costs, recognition of such stumbling blocks have contributed to the cooling of passion for reform in Colorado.

A better approach for Colorado as well as the nation as a whole is a forward-looking, comprehensive, more practical industry liberation aimed at loosening the regulatory wires binding the entire industry, not merely the generation sector. This approach protects the long-term economic health of the electricity industry. Removing the artificial walls between sellers and buyers at all levels of the power marketplace is essential if customers and the industry are to fully benefit.