Electric Utilities Brace for New State Rules Massachusetts Is Case Study of Effort to Boost Competition

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NOW that most people are used to choosing their long-distance telephone carriers, they can start thinking about what it would be like to choose their power company.

There's a serious move afoot in the United States to unplug electric utilities from the monopoly status they have held since the 1930s.

The idea is that customer choice would drive electricity rates down. The same idea led to deregulation of airlines, the trucking industry, and the phone companies. Power companies in Massachusetts, for example, recently filed bulky deregulation plans at the request of the state Department of Public Utilities (DPU). The process of public hearings and government-industry give and take is not unique to the Bay State. Prodded by moves toward electric power deregulation at the federal level, states around the country are moving at various speeds to reform the way power is delivered to homes. "There's no doubt at all" that deregulation can give individuals and businesses a price break on electricity, says Thomas May, chief executive officer of Boston Edison Company, the region's biggest utility. But he then offers very a big "However, ...." "This will involve a very complex change," Mr. May warns. "And when you are dealing with a commodity, and electricity is a commodity, you are dealing with a market mechanism. When markets are out of balance, prices spike up dramatically." The trick will be, he says, to move to a competitive market and maintain a pool of power that is adequate, competitive, and steady. If electric power is disrupted in any part of a large system, experts say, it is subject to rapid, sometimes destructive flows, unlike gas flowing in a pipeline, for example. California is also moving on deregulation, and most states are at least considering it. Experts in Massachusetts say their state has moved further down the deregulation road than other states. The state is expected to decide later this year on how to implement deregulation. As far back as 1978, federal law began to permit competition in the power industry at the wholesale level. Utilities were told to buy power from businesses that generated renewable power outside of the monopolistic utility sector, and states had to implement the law. The law was one of several at the time that were geared to help the US recover from the oil-price shock of the early 1970s. A small but influential private generating industry developed. The Energy Policy Act of 1992 increased the number of suppliers that could generate energy privately. …

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