Paying Higher Electric Bills Under “Deregulation” for Past Choices by Regulators and Regulated Utilities

Michael Giberson

The Washington Post today contains a story titled, “Decade of Deregulation Felt in Climbing Bills“:

As they watch their bills climb, electricity customers in the Washington region might be surprised to know they are paying costs that have nothing to do with the rising price of fuel.

Virginians are paying Dominion Power tens of millions of dollars a year for a nuclear plant the company planned in the 1980s but never built.

More than 1 million residents of the Washington-Baltimore area paid $920 million to take the Calvert Cliffs nuclear plant — now owned by shareholders of Constellation Energy Group — off-line in 2034 before state lawmakers agreed to a deal this month requiring the company to take over the federally mandated decommissioning costs.

Maryland customers also paid almost $1 billion to reimburse power companies for constructing plants. Today, thousands of Virginians are still paying these charges, regulators say, although the plants’ value has soared.

These costs were added to residential customers’ bills under deals struck by lawmakers almost a decade ago when the region’s electricity markets were opened to competition.

Federal rules that accompanied deregulation also increase costs to consumers. Because of them, customers pay a premium for living in a congested region thirsty for power. And although they began paying surcharges last year so power companies will invest in new plants, the charges have resulted in relatively few additional megawatts. These charges account for about 25 percent of the price of electricity in the District and Maryland and less in Virginia.

The article hits many of the key parts of the story behind retail electric rates in DC, Maryland, and Virginia over the last ten years. Overall the story is probably good enough to deserve a thoughtful going over, to explain with more care the background and context of some of these “key parts.”

For now, however, just my initial reaction: For a story purportedly about deregulation and climbing bills, the story seems to spend a lot of time talking about legislative and regulatory decisions made five or ten years ago. Some of those decisions of ten years ago involved deciding how consumers would be made to pay off the costs of regulated utility and regulator choices of ten+ years earlier which turned out to be mistakes.

So how is this a “deregulation” story?

And, by the way, while consumers do continue to pay for decades-old choices made under the old regulatory regime, these payments are relatively fixed and have almost nothing to do with the “climbing bills.” In general, the climbing part of the bill is almost all “the rising price of fuel.”