State and Federal Energy Policy
Effects of Deregulation on the U.S. Electricity System
Historically, electricity service has been defined as a natural monopoly, meaning that the industry has (1) an inherent tendency toward declining long-term costs, (2) high threshold investment, and (3) technological conditions that limit the number of potential entrants. In addition, many regulators have considered unified control of generation, transmission, and distribution as the most efficient means of providing service. As a result, most people (about 75 percent) are currently served by a vertically integrated, investor-owned utility.As the electric utility industry has evolved, however, there has been a growing belief that the historic classification of electric utilities as natural monopolies has…
