Turning on the Lights: Deregulating the Market for Electricity

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Consumers, industry and business have reaped enormous benefits from increased competition and innovation following the deregulation of major industries in the United States and other countries. In the U.S. deregulation of five major industries - natural gas, trucking, long-distance phone service, railroads and air travel - provides total annual benefits to consumers from price reductions and service quality improvements exceeding $50 billion.

Currently, state legislatures and the U.S. Congress are debating deregulation of the largest, most highly regulated monopolistic industry: electric power. Commercial and residential customers spend more than $200 billion a year for electricity. Of that amount $20 billion to $50 billion is unnecessary spending caused by regulatory inefficiencies. Regulation also causes electricity prices to vary widely from state to state...

The Department of Energy's Energy Information Administration has estimated that just allowing competition in retail sales to consumers - without eliminating the costly inefficiencies of federal regulations - could lower electricity prices on average by as much as 6 percent to 13 percent within two years. A Clemson Universityersity study estimates that broader deregulation measures and competition would lower electricity prices by at least 13 percent and perhaps as much as 26 percent.


National Center for Policy Analysis