Restructured wholesale electricity markets in some of the most populous states are driving up energy bills and have failed to provide promised benefits to consumers, the American Public Power Association (APPA) said.

In a white paper released yesterday, APPA proposes modifying the markets in a way that truly benefits consumers, rather than allowing them to continue to be harmed by markets that merely pretend to be competitive.

"The wholesale electric markets operated by Regional Transmission Organizations (RTOs) under federal supervision have driven up electricity bills twice as fast as in regions without such markets," said Mark Crisson, president and CEO of APPA. "This is a growing problem for businesses and consumers in these regions, threatening jobs and families in a tough economy. A few companies are reaping huge profits at their expense. It's time for Congress and the Federal Energy Regulatory Commission to act."

Over the last 15 years, as states and the federal government began deregulating electricity markets, the promise of competition and reliable power service has been replaced in wholesale markets by dysfunctional centralized markets operated by faceless, multi-billion-dollar bureaucracies known as RTOs. These markets have not produced needed investments in additional power generation capacity and their high costs to consumers leave little room to pay for the costs of new generation and needed environmental mitigation measures.

APPA suggests reforming the system to maintain those functions that RTOs are performing well, but to eliminate or substantially scale back the highly problematic centralized markets. These positive RTO functions include: ensuring that all buyers and sellers have open access to the transmission system, simplifying regional transmission rate structures, and supervising regional transmission system operations.

Until such fundamental market reforms are implemented, APPA is calling for a number of immediate steps to be taken that can provide consumers with some relief, including requiring demonstrations that new markets or programs provide net benefits to consumers, improving governance of the RTOs to make them more responsive to consumer concerns, and providing for truly independent market monitoring.