Economic regulation-traditionally exemplified by that noew-defunct industry regulatory body, the Interstate Commerce Commission - was considered virtually the entire field of regulation 30 or 40 years ago.
The electric utility industry in the United States began in the late 1870s as a street lighting and electric railway business, prinicipally provided by private electric companies.
two key objectves:
1. to protect consumers against exorbitant changes that might otherwise result from the monopoly aspect of public utility franchises
2. to set rates for service at levels that will afford the companies an opportunity to earn a fair and reasonable rate of return.
The movement to regulate electric power resulted from two basic factors.
1. consolidation in the early 1900s of competing utilities often rpoduced price fixing
2. Most students of the subject assumed that utilities are natural monopolies and that attempts to introduce competition would increase unit costs by forcing duplicaiton of costly transmission and distribution networks.
Some energy experts have gleaned some lessons for the future from the Californian experience:
1. Replacing regulation with a well-functioning competitive market is not easy.
2. Consumers cannot be insulated from changes in wholesale prices
3. The real benefits of electricity deregulation come from encouraging new investments in more efficient power plants.
Antitrust regulation has also changed significantly during recent decades.
The criteria for judging harmful levels of industry concentration have been altered.
Source: Business and Government in the Global marketplace (7 edition Murray L. Weidenbaum)
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