Utility Deregulation

States Must Lead Utility Restructuring

Electric utility restructuring is an issue that states must address, and states cannot afford to make cost the only consideration. "The idea that the federal government will remove the hard choices or dictate the options is nonsense," stated Ralph Cavanaugh of the Natural Resources Defense Council. "The federal government will defer to states on issues that states traditionally handle." He urged lawmakers to explore their options, as decisions left unmade will be decided in board rooms.

The potential benefits of utility restructuring — namely lower consumer costs — are well-known. "Utility costs account for five percent of median household incomes" with an even higher percentage for the elderly and indigent, noted Chris Baker, Analyst at the AARP Policy Institute.

From there, possible impacts of deregulation become much murkier and more difficult to predict. Nonetheless, there are critical questions to answer if states are able to successfully engage in the utility deregulation debate.

Montana state Rep. Steve Doherty, citing deregulation efforts in Montana, noted that there are some "right questions" that must be asked to avoid surprises after deregulation has occurred. Issues that lawmakers should address before casting votes include: net job changes; utility reliability; the need for incremental steps to deregulation; and resultant tax base changes.

Deregulation experiences in Washington state were similar to those of Montana. Washington state Rep. Mike Cooper acted as part of a "common sense" coalition made up of members of AARP, the Grange, the International Brotherhood of Electrical Workers (IBEW), Reform Party, labor and Republicans from rural districts. The coalition demanded answers to many of the questions Doherty posed. Held up to this level of scrutiny, the Washington bill failed. In its place, Washington state passed a consumer protection bill that forces future deregulation attempts to begin with fairness and consumer interests as first priorities.

Following the Washington model, it will be up to individual states to provide leadership in utility restructuring efforts. States must be prepared to fix problematic bills. States will be responsible for ensuring that hometown utilities continue to provide for local customers and that no one is left without electricity. States must also look hard at environmental implications and stranded costs from utility restructuring — and make sure consumers really do benefit.