Assessing the Effects of Bulk Power Rate Regulation

The supply of electricity, at both retail and wholesale levels, has long been subject to detailed state and federal regulation in the USA. However, much has changed since this regulatory structure was established, and the benefits of regulation are increasingly being brought into question. This paper reports results from the first year of a market experiment authorized by the Federal Energy Regulatory Commission (FERC) to assess the effects of relaxed federal regulation of bulk power transactions. In the experiment, FERC authorized a number of utilities to exchange electricity under substantially modified regulation. Using detailed load, cost and transaction data provided by the participating utilities, this paper analyses the effects of changing regulation of bulk power transactions.