Clinton Electricity “Deregulation” Re-Regulates Industry

Washington, DC, March 25, 1998 — “If the Clinton administration’s ‘Comprehensive Electricity Competition Plan’ is to deregulate electricity, government oversight of the power industry must decrease. That doesn’t happen here,” said Competitive Enterprise Institute fellow in regulatory studies Wayne Crews. “This ‘Competition Plan’ is re-regulation – not deregulation.”

“The administration fails to identify and attack the source of utility monopoly power in America – the local, government-granted, exclusive franchises utilities enjoy,” Crews continued. Instead, Clinton’s plan needlessly embraces mandatory “open access” to the power grid, thereby wresting control of the power grid from its owners in a misguided attempt to accomplish by mandate what the market itself could accomplish by ending franchises.

“Clinton’s open access requires more, not less, regulation, because essentially everyone with a kite and a key that wants to dump electricity into the grid can do so.” Crews noted. Proper deregulation will abolish the local franchise monopolies and let rival power producers figure out for themselves how to get power to today’s captive customers. “In lieu of open access, new power suppliers can reach customers by forming strategic partnerships with firms that already enjoy access to consumers, such as real estate developers, cable companies, phone companies, even railroads,” continued Crews. “Such pressure will induce many utilities to offer open access to their lines voluntarily, thus the market will evolve more naturally.”

Proper deregulation may even give renewable energies a better chance, according to Crews. To the extent mandatory open access protects today’s central station generation relative to new generation projects, renewable development and innovation is harmed. “Mandatory access offers no end to regulation. But abolishing franchises instead will give energy entrepreneurs – large, small and renewable – the freedom they need to thrive,” said Crews.

Crews outlined a true, market-based approach to electricity deregulation in the December 1997 issue of Electricity Journal. His article, “Electric Utility Reform: The Free Market Alternative to Mandatory Open Access,” argued that consumers do not need to be tied to local distribution monopolies and there is no need for regulated open access. Competitors other than utility monopolies must be free to exploit delivery markets.

The Competitive Enterprise Institute is a Washington-based public interest group dedicated to the principles of free enterprise and limited government. Contact Wayne Crews at 202-331-1010.