It's the slow season for the laundromat in tiny Milford, Pa., yet
owner Darryl Wood has raised the price of a wash by 50 cents this
year, to $2.50. The reason? Electric rates have more than doubled
since January, threatening to close the lid on a business his family
has run for decades.
"I've already seen an electric bill higher than anything that
I've ever gotten," he says. "I thought deregulation would bring
rates down. Now, I'm just hoping we can hang on."
His ordeal reflects the fresh dismay many consumers are feeling
about the deregulation of the electric utility industry. When
deregulation was implemented in the 1990s, supporters said it would
drive rates down through competition.
But data so far suggest that rates in deregulated states are
rising faster than those in regulated states. That trend could
expand as caps on retail electric rates, which have held prices
down, are lifted in at least six deregulated states this year.
The issue is heating up:
* In Maryland, where homeowners were threatened with a 72 percent
rate hike this summer, deregulation is suddenly a major issue in the
* In Delaware, where Delmarva Power set forth rate jumps of at
least 59 percent, lawmakers responded by phasing them in over
several years and requiring power companies to do long-term
Price comparisons are limited because rate caps are only just
being removed. But in New England, where many caps came off last
year, retail electric rates surged about 15 percent - except for
Vermont, where regulated rates are roughly flat. In the Mid-
Atlantic region, rates in deregulated New York have risen 16 percent
since 2002, while rates in still-regulated West Virginia were about
Such unexpected disparities are prompting a backlash in states
that recently allowed markets to set wholesale and retail pricing.
And it's fueling a debate over what went wrong.
Industry officials blame price spikes on higher fuel costs and
rate caps set too low years ago. But fuel hikes are only a partial
explanation, analysts say. Lack of competition and the ability of
companies to sway markets to maximize profits may be factors, too,
"There has been and is today no true competition in wholesale and
retail electricity markets," the Electricity Consumers Resource
Council wrote in a filing with the Federal Energy Regulatory
Commission in November.
Power companies strongly disagree.
"Competition has been incredibly robust," says John Shelk,
president of the Electric Power Supply Association. "People believe
if prices rise something is wrong.... But the reason is the cost of
That hasn't cooled the anger in Pike County, Pa., which includes
Milford, where residents are telling regulators that the doubling of
their rates is outrageous. Just two suppliers bid in an auction to
serve the area last October. "It seems a little fishy to some
people," Mr. Wood says. "It's very bad for the economy here and for
Some states are even considering re-regulation. But getting the
"genie back in a regulated bottle" may be difficult or impossible,
says Christie Rewey, an energy specialist at the National Conference
of State Legislatures in Denver.
Many states sold their generating stations for a song in the
1990s, she says. Now these same states find that those old plants
are a gold mine for their owners and would be very costly to buy
Today, 16 of 23 states that initially passed electricity
deregulation offer a fully deregulated power system, studies show.
At least 34 states have repealed, delayed, suspended, or have
limited retail access to just large customers or are no longer
considering deregulating electricity for retail customers, according
to a study last year.
Take Montana. It once had the region's lowest electric rates, but
sold off its hydro-dams and deregulated in 1997. …