Center for the Study of Energy Markets

Over the past eleven years, US electric utilities have faced significant changes to their competitive and regulatory environments. The Energy Policy Act of 1992 opened access to transmission for nonutility generating plants. Then, beginning with California in 1996, nearly half the states passed and a smaller number enacted restructuring legislation that involved complete retail access. The industry restructuring is designed to enhance economic efficiency at all levels of operation, including distribution, transmission, generation and retail services. The gains are likely to be largest in electric generation because generation costs are the largest component of end-use costs and restructuring has a larger impact on generation than on other segments of the electricity industry, such as transmission and distribution, which are likely to remain at least partially regulated. This chapter will evaluate changes in the efficiency of electric generation from restructuring. It both summarizes the current state of knowledge on the topic and serves as a roadmap for future work.