Hotwiring Deregulation: How SRP Can Lead the Way to a Competitive Electric Market

Posted on September 01, 1997 | Type: Policy Report | Authors: Melinda Ogle, Robert J. Franciosi
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EXECUTIVE SUMMARY

At the end of 1996, the Arizona Corporation Commission passed a rule that phases in deregulation in the electricity industry over the next five years. The legislature will likely take action next year.  In order to implement competition, Arizona's policy makers must untangle a knot made up of opposing interest groups:  consumers big and small, urban and rural; utilities in and out of state; investors, environmentalists and the occasional stray intellectual.  One of the issues facing policy makers is the status of utilities not under the Corporation Commission's jurisdiction.  These include a handful of municipal utilities, irrigation and electrical districts and the Salt River Project.  However, SRP's status, far from being an obstacle, represents an opportunity to hasten the introduction of competition in the electricity industry to Arizona.  SRP's autonomy gives it the power to introduce full competition to its service territory without the hurly-burly that is accompanying the Corporation Commission's efforts.  With SRP leading the way, the rest of the Arizona cannot afford to dawdle.

 

The electric power industry is on the threshold of a new era.  Technological progress and an intellectual revolution have made the old paradigm of electric utilities as regulated monopolies obsolete.  Like the deregulatory waves in transportation and telecommunications, deregulation in the electric power industry promises to bring great benefits to consumers and businesses.  Before deregulation, only half of Americans had traveled on a plane, and cordless phones and fax machines were toys of the rich. Airline deregulation has saved consumers an estimated $12.4 billion and  raised the number of Americans who have traveled by air to 75 percent.[1]  In the communications arena deregulation has contributed to a 6 percent per year decline in the real cost of an interstate phone call since 1984, and a 740 percent increase in the number of fax machines, among other things.  Similarly, electricity deregulation promises lower costs, new products and innovations in service that boost efficiency.


[1] Robert Crandall and Jerry Ellig "Economic Deregulation and Customer Choice:  Lessons for the Electric Industry," Center for Market Processes, George Mason University, Fairfax, VA.

Read Hotwiring Deregulation here.

 

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