Retail electricity consumers could save up to 9% of their power bills in states that have yet to deregulate their electricity markets, according to The Fraser Institute's Power Jolt Required: Measuring the Impact of Electricity Deregulation. In total, American consumers would save US$10 billion from lower electricity prices if every state matched the best practices of the fully deregulated states.

“Opponents of deregulation point to the failed California experience and Enron as evidence against reforming electricity markets,” said Mark Mullins, the institute's director of Ontario Policy Studies. “This study shows that they are dead wrong in that belief. The benefits of competition and consumer choice can already be demonstrated in places that have chosen to deregulate: much greater supply and lower electricity prices.”

The report assesses how deregulation affects new electricity supply and retail pricing. The report examines the experiences of global deregulation reform leaders in the United States, Canada, Australia, the United Kingdom and New Zealand. It finds that 13 states are leading the way in American deregulation.

The study finds that deregulating jurisdictions have attracted more new generation supply than non-reformers, with 80% faster per capita growth in the United States over the latest five years, and even more in Canada. Generation growth has been consistently high in the United Kingdom and Australia but weaker in New Zealand.

Deregulation also has lowered after-inflation electricity prices in the United States, the United Kingdom and Australia. For example, retail residential prices for U.S. state reformers dropped 80% faster than non-reformers over the latest five years and nonresidential prices dropped 65% faster. Prices in Alberta and New Zealand have risen for exceptional reasons unrelated to deregulation.

U.S. states that have yet to reform could deregulate and drop prices there by 7% to almost 9% over five years. This is double the price drop that actually occurred in non-reforming states between 1997 and 2002. Similar gains are achievable in non-reforming jurisdictions in Australia and Canada.

Consumers and taxpayers everywhere can reap these economic gains from deregulation by introducing customer choice, competition, privatization, market pricing and effective regulation.

“It is a fallacy that the electricity market cannot be deregulated,” said Mullins. “Even the short-run experience since the late 1990s shows significant supply and pricing benefits in reforming jurisdictions. The real constraints on deriving consumer benefits from this industry are public misconceptions and the unwillingness of many politicians to create positive change.”
Circle 151 on Reader Service Card or visit freeproductinfo.net/tdw