Figure 1. Status of State Electric Industry Restructuring Activity, as of February 2003.
NOT TO SCALE
ties that served four basic business functions: They generated electricity in
power plants; they transmitted that electricity over transmission lines; they distributed electricity through distribution
lines; and they sold electricity to residential, commercial and industrial users.
Each electric utility was granted a
monopoly franchise to serve a given area.
After years of functioning more or less
as energy islands, in the 1970s utilities
began to jointly build power plants and
to exchange power among themselves,
initially for emergency-related reasons,
then increasingly for economic reasons.
Utilities formed power pools to schedule
not only the building of power plants
but the economic dispatch of the electricity. These power pools ultimately
evolved into independent system operators (ISOs) and more recently into regional
transmission organizations (RTOs).
The passage of the Public Utility
Regulatory Policy Act in 1978 assisted in
the growth of an independent power-producing industry in which electricity
was generated by entities not related to
Restructuring Not Active
Source: Energy Information Administration.
or a part of the monopoly electric utilities.
The Energy Policy Act of 1992 further
enhanced the development of the independent power generation sector.
The Federal Energy Regulatory
Commission (FERC) implemented these
acts (along with the edicts of the courts
that opined on FERC regulations), which
ensured the growth of independent power
generation and caused the transmission
facilities of the electric utilities to become
more open and available to all. As the
power pools evolved into RTOs, they not
only served as generation and transmission schedulers, but they also became
wholesale market creators and managers.
There are now six regional wholesale
markets functioning across the United
States: PJM Interconnection, from Illinois
to New Jersey; New York ISO; ISO New
England; California ISO; Midwest ISO; and
the Electric Reliability Council of Texas.
With these federal efforts driving
change with respect to electric generation
and transmission, it was only natural that
a change in the industry’s retail portion
would follow. Retail electricity industry
restructuring, though geographically widespread, was not a national phenomenon.
Most states in the Northwest as well as
those in the Southeast did not restructure,
primarily because it was perceived by
politicians, regulators and/or incumbent
utilities that the availability of low-cost
power in those areas was not conducive to
In 2005, dissatisfaction with
electric industry restructuring
began growing. A number of
highly publicized incidents
made users become wary of
restructuring. After California’s power
meltdown (which caused them to put
restructuring on hold) and the fall of
Enron in 2001, no additional states passed
restructuring legislation, and some even
tried to unscramble the egg by attempting
to return to traditional regulation.