The electricity system at the crossroads--policy choices and pitfalls.

Economic Perspectives, March, 2002 by Mattoon, Richard

Introduction and summary

In the mid-1980s, electricity policy in the United States began a new chapter when wholesale electricity markets were opened to competition. While the immediate goal was to increase the diversity of supply for electricity generation, proponents of restructuring also cited other dimensions of success arising from the restructuring of other network industries (such as telecommunications, airlines, and natural gas) as justification for introducing competition to the electric utility industry. Wholesale competition for producing electricity would improve generation efficiency, diversify supply, promote innovation, and even lower prices. Success in opening the wholesale market, proponents argued, would eventually be extended to the retail...

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