Utility Deregulation


The electric utility industry began in the late 1870's as street lighting and electric railway business by private electric companies. Through the years it has grown to become one of the nation's largest business enterprises. Some municipally owned electric systems were established to provide street lights and to replace arc lighting systems during a depression period when electric companies were unable to secure funds for expansion (Weidenbaum 1995).
Electricity service is customarily viewed as consisting of three parts: production of power, transmission of the energy over high-voltage lines, and low local distribution to the final customer. Most private firms in the industry are ...

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electric utility companies own over three-fifths of the electric power industry when measured by sales or generation of electricity. The remainder consists of the federal government, municipalities, state and district agencies, and cooperatives (Weidenbaum 1995).
The movement toward regulation of electric power resulted from two basic factors. The consolidation in the early 1900s of competing utilities often produced price fixing, and attempts to introduce competition would increase unit costs by forcing duplication of costly transmission and distribution networks.
Regulation is designed to serve as a substitute for competition so that the economies resulting from using a single supplier are passed onto the customers. A revolution is also occurring in the regulation of what was once viewed as natural monopolies. Public utilities used to receive a franchise to be the sole local supplier. In return, they had to provide virtually universal service at regulated rates and were ...

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have the difficult job of verifying that prices charged to different classes of customers are just, reasonable and based on an equitable distribution of cost. The maximum allowable rates to be charged are based on two key objectives. The first is to protect consumers against exorbitant charges that might otherwise result from the monopoly aspect of public utility franchises. The second is to set rates for service at levels that will afford the companies an opportunity to earn a fair and reasonable rate of return (Weidenbaum 1995).
The tidal wave of deregulation that has swept through the airline, telecommunications, and natural gas industries is hitting the electric utility ...

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PAPER DETAILS
Added: 5/16/2007 09:12:42 AM
Category: Miscellaneous
Type: Premium Paper
Words: 1295
Pages: 5

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