The End of a Natural Monopoly: Deregulation and Competition in the Electric Power Industry

By Peter Z. Grossman; Daniel H. Cole | Go to book overview
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7.

UNIVERSAL SERVICE IN COMPETITIVE RETAIL ELECTRIC MARKETS: REFIN(ANC)ING THE DUTY TO SERVE FOR A POST-NATURAL MONOPOLY ERA

Jim Rossi


INTRODUCTION

During the twentieth century, the privately-owned electric utility was regulated as a natural monopoly. According to the natural monopoly paradigm, a vertically-integrated electric utility provided generation, transmission, and distribution service to all customers within a geographic service territory. While the firm was allowed to operate as a monopolist, it also had certain responsibilities: it submitted to price regulation and assumed obligations to extend service to all customers within its geographic service territory and to continue providing service, once service had commenced (Haar & Fessler, 1986).

With the advent of deregulation, it is assumed that markets will largely displace price regulation, but little discussion focuses on the implications of deregulation for utility service obligations in the electricity industry. Today, electric utilities' extraordinary service obligations-often collectively referred to as the “duty to serve”-face their largest challenge ever. The potential conflict between universal service and retail competition in electricity bears

The End of a Natural Monopoly: Deregulation and Competition in the Electric Power Industry, Volume 7, pages 141-167.
Copyright © 2003 by Elsevier Science Ltd.
All rights of reproduction in any form reserved.
ISBN: 0-7623-0995-4

-141-

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