NCPA - National Center for Policy Analysis


November 11, 2009

Arizona's consumption of electrical power has been growing at about three times the rate of the United States as a whole.  Even though demand recently has slowed as a result of the economy, experts agree eventually things will pick up.  When it does, existing supplies of electricity won't be enough to keep up, says Nick Dranias, constitutional policy director for the Goldwater Institute. 

"Opening our electricity market to competition will increase the amount of energy available and will stabilize rates, ultimately driving them down," says Dranias.   The Goldwater Institute recommends restructuring Arizona's electricity markets for competition in three steps:

  • The electricity monopoly must be ended; steps will be taken to prevent companies like APS, SRP and Tucson Electric Power from controlling the electricity market.
  • Regulations that block new businesses from producing and selling electricity would be repealed or prevented.
  • Consumers would be free to purchase electricity from any company they want or produce it themselves.

The surest way to get the ball rolling is to make sure entrepreneurs are free to innovate in "distributed power generation," says Dranias.

  • Distributed generation is when a source of electricity is built near the place it will be used and the power is sold to those nearby users, bypassing the grid except for backup purposes.
  • But the Arizona Corporation Commission is considering regulating distributed generation like a standard electricity company, which would significantly undermine this progress.
  • The competitive electricity market in Texas, for example, increased generation capacity by 35 percent from 1998 to 2006.
  • In Britain, a similar expansion in capacity ultimately lowered rates 30 percent in 10 years.

The bottom line is that more competition and more supply will keep rates lower than what monopolies charge, says Dranias.

Source: Nick Dranians, "It's Time to Rethink Electricity," The Arizona Republic, November 9, 2009.

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