NCPA - National Center for Policy Analysis

Confusion During Deregulation Leaves Electricity in Short Supply

May 11, 2000

The process of deregulating the various components of the electricity industry is in its fourth year. Some states have deregulated while others have not. Experts say the process has been plagued by confusion.

Moreover, the U.S. is running short of electricity. Energy Secretary Bill Richardson is warning of brownouts and outages this summer. "America is a superpower," he says, "but it's got the grid of a Third World nation."

  • The U.S. has generating plants capable of cranking out 780,000 megawatts of electricity on a summer's day.
  • But it will take a minimum of 700,000 megawatts to power the nation this summer, according to the Department of Energy.
  • The buffer of surplus electricity has been whittled by 60 percent over the past decade -- in great part because of the economic boom.
  • Deregulation is now underway in 24 states -- and the incomplete nature of the effort has led to uncertainties, confusion and planning paralysis that could have long-term consequences, observers report.

For decades, giant manufacturing companies have assured themselves of guaranteed supplies of electricity by building their own generators and substations. Now other companies -- the Oracle Corporation is one example -- are doing the same.

Regulators, who are often confused as to whether they should be enforcing the old rules or tearing them down, have been letting things slide.

Source: Rebecca Smith, "New Rules, Demands Put Dangerous Strain on Electricity Supply," Wall Street Journal, May 11, 2000.


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