Will customer choice always lower costs?
Since competition may either increase or decrease electricity costs for individual customers, regulators need the authority and tools to determine whether retail competition will result in a lower or higher cost of electric service, and whether anti-competitive conduct can be detected. Today`s regulations of the electric industry generally allows only a single supplier to serve all retail customers within an exclusive service territory. Due to changes in technology, law, and in what might best be called philosophy, many large customers are now being joined by independent power producers, marketers and brokers in arguing that a multitude of suppliers should be allowed to compete to serve retail customers. Thus, a critical issue regulators and legislatures must address is whether or not to allow more than one supplier of electricity at the retail level. The primary economic rationale for permitting exclusive service territories and a single retail provider is the existence of a natural monopoly. The driving force for retail competition, on the other hand, is the perception that a less costly non-utility option is available for a number of customers. Conventional wisdom seems to see natural monopoly and lower-cost options for customers as mutually exclusive alternatives. That is, it is often thought that there can be no less costly alternative for any customer if a natural monopoly exists. Conversely, if there is a cheaper alternative for any customer, many see this as evidence that a natural monopoly no longer exists, and that free entry into the retail market should be allowed.
- OSTI ID:
- 486397
- Journal Information:
- Electricity Journal, Vol. 9, Issue 8; Other Information: PBD: Oct 1996
- Country of Publication:
- United States
- Language:
- English
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