After significant rate increases in many retail access states, regulators and policy-makers are asking two critical questions: (1) Do the sharp increases in rates mean that customer choice and electric utility restructuring have failed? and (2) What can be done about these rate increases? The concerns about restructuring and retail access in the electric utility industry today are quite a change from 10 years ago, when it was widely anticipated that customer choice and competition would lead to lower rates, enhanced services, improved efficiency, and environmental benefits.
To be sure, restructuring always was a controversial issue in terms of implementation. However, back in the mid- to late 1990s few questioned the prospect of significant economic benefits that competition and customer choice would provide. For many today, that “conventional wisdom” seemingly has shifted almost 180 degrees. Much of that shift in sentiment is triggered by the rate shocks experienced in many retail access states as market prices increased and restructuring-related rate freezes expired.