Analysis of three states identifies shortcomings of electric deregulation policies
LANSING, Mich.―Public Sector Consultants Inc. today released three reports highlighting the problems faced by three states that have deregulated their electricity markets—Texas, New Jersey, and Illinois.
“We have done an in-depth analysis of three states in different parts of the country that have deregulated their electric market,” said Ken Sikkema, Senior Policy Fellow at Public Sector Consultants. “Significant problems have surfaced over time, including persistently high rates, power shortages, expanded—but untested—roles for government, and a potential loss of state control over energy policy.”
In Texas, deregulation has resulted in concerns about power shortages because reserves could drop almost 4 percent below reliability targets next year, even while electric rates are higher and more volatile in the areas of deregulation, compared to areas that are fully regulated.
The high electric prices that prompted New Jersey to deregulate 14 years ago persist—New Jersey still has the 6th- highest electricity rates in the U.S. Frustration with the lack of needed new generation in the state and a reliance on out-of-state generation have led to new attempts at regulation in New Jersey and a battle between the state and the federal government over state energy policy.
In Illinois, dissatisfaction with the results of deregulation has led to a sharply expanded role for government.
Michigan is evaluating options for electric choice as part of Gov. Rick Snyder’s Readying Michigan to Make Good Energy Decisions effort. “The challenges documented in these reports indicate the serious risks associated with a fully deregulated electric market structure,” Sikkema noted. “Michigan should carefully consider the experience of these three states as it decides its energy future.”
The three case studies are the latest in a series of reports Public Sector Consultants has published on electric market structures and state energy policy. Earlier reports include: Electricity Restructuring in Michigan: The Effects to Date of PA 141 and Potential Future Challenges, 2006; Market Structures and the 21st Century Energy Plan, 2007; and Michigan’s Current Energy Plan, 2012.
Public Sector Consultants is Michigan’s most respected, connected, and dedicated research and program management firm, with specialties in governance and regulation, health care, education, energy, and environmental policy. PSC is committed to providing objective research and sound solutions to the public and private sector.
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