I strongly recommend these two articles if you want a good, thorough analysis of what’s going on with electricity:
This Wall Street Journal article by Rebecca Smith is a really thorough study.
The main defects are transmission systems badly in need of improvement and a chaotic combination of regulated and deregulated markets. The unsteady regulatory situation, among other factors, inhibits the investment that is critically needed to improve transmission equipment.
The nation is stalled in the middle of a massive but incomplete shift from old-fashioned state-regulated utilities — which generate their own power, move it over their own transmission lines, and sell to local customers — to a system in which ownership of plants and transmission lines is broken up among a variety of players, and government oversight is fractured. …
The main problems date to a deregulatory movement that began in the early 1990s, but never completely took hold. In 2000, the deregulation drive sputtered in the midst of a series of electricity-related crises. First came the near meltdown of California’s power market that year and the next. Supply shortages, combined with unscrupulous practices by power merchants taking advantage of poorly drafted rules, produced soaring electricity prices and rolling blackouts in the state. Then came the December 2001 bankruptcy filing of Enron Corp., a pioneer of free-market electricity trading that collapsed amid fraud allegations.
Today, some power generators report to state commissions, while others are overseen by federal agencies in Washington. Some power is sold by heavily regulated traditional utilities at slightly above cost, while some is sold by new independent power companies for whatever price the market can bear. Some transmission lines — the critical conveyor belts of power — are owned and run by utilities, while others are managed by a new breed of quasi-public independent grid operators whose jurisdictions encompass many utilities, often in several states.
This Sunday Washington Post article by Peter Behr and James Grimaldi, to which I referred in an earlier post, is also thorough and well-written. They have a nice discussion of the interesting political bedfellows that electricity deregulation debates have created:
The debate has produced unusual allies, with powerful utility companies such as Atlanta-based Southern Co. agreeing with such consumer organizations as the Public Interest Research Group. Southern and PIRG contend that new federal rules would bring the kind of free-market reforms, once advocated by Enron Corp., that could produce California-style energy crises.
Atypical political fault lines are another complication. While some of the debate mirrors ideological rhetoric of states rights vs. federal control and deregulation vs. consumer rights, the groups of political allies just as often reflect regional differences than partisan politics.
Southern has been the target of repeated allegations that it favored putting off repairs of the “chokepoints” on the transmission grid because it wants to limit competition from outside its region. Upgrading transmission lines would permit electricity to flow more freely and make it difficult for one dominant player to monopolize the power lines.
Officials at Southern dismiss such talk and say they have spent, and plan to spend, billions of dollars upgrading transmission lines in the South. They also advocate building smaller power plants closer to large clusters of electricity users to reduce stress on the grid.
In the past three years, Southern has spent more than $10 million on lobbying, employing a dozen lobbying firms in addition to its own in-house lobbyists. Included on Southern’s six-page list of areas of lobbying are the FERC rules Shelby is seeking to delay until 2005.