Electricity restructuring: Deregulation or reregulation?

HEADNOTE

Is there a coherent vision for competitive electricity markets?

RESTRUCTURING IN THE ELECTRICITY INDUSTRY IS spreading across the United States and around the world. Some of these initiatives are well under

way-for instance, in California, Pennsylvania, Australia, Norway, and the United Kingdom-but far more are in the design and early implementation stages. There also are bills in Congress to encourage the formation of open markets for electricity The restructuring process has achieved some significant successes-most notably keeping the lights on. But serious problems-some predictable, others not-have also arisen.

As other jurisdictions refashion their electricity markets, they seem to be incorporating little of the experience from the markets that are furthest along in the process. That is unfortunate, because there are important and quite general lessons that can be gleaned. Probably the two most salient lessons are that the short-run benefits are likely to be small or nonexistent, and the long-run benefits, while compellingly supported in theory, may be very difficult to document in practice.