Competitive pricing in the electric utility industry

The seeds of competition have begun to erupt in the electric utilitiy industry. Electric utilities are entering an era in which their monopoly power is being seriously threatened from different sides. Particularly, utilities are more intensively competiting among each other and, in some cases, with independent power producers in both the wholesale and industrial markets. In addition, independent power producers have emerged as serious rivals of local utilities. State and federal public utility regulators are under pressure by market and technologial forces to alter their policies so that competition can be accommodated. The general consensus is that the electric utility industry is rapidly moving toward soem form of partial deregulation. At the minimumm, regulatory reform of the electric utility industry seems imminent over the next few years. The major challenge confronting state public utility commissions (PUCs) is to harness the emerging competitive forces so that consumers can reap a major share of the benefits over the transitional period in which electric utilities will continue to have exclusive frachises and full control over the transmission network. This paper focuses on the pricing policies of PUCs in the context of an increasingly competitive industrial market. Many electric utilities face the possibility ofmore » losing a large portion of their industrial load to alternate suppliers and technologies. ''Bypass'' has become a major concern of utilities and regulators. The electric utility industry is no longer immune from the bypass phenomenon that has recently erupted in the telecommunicatiosn and natural gas industries. How regulators can best cope with the prospects of bypass in the electric utility industry is the major topic of this paper. 15 refs., 2 figs., 1 tab.« less