Electric Utility Deregulation Update 
courtesy of Carolina Country magazine
 
What is happening in North Carolina?

The North Carolina Study Commission on the Future of Electric Service decided to place its restructuring deliberations on hold until early 2002. Study Commission meetings were interrupted in 2001. Some members expressed concern about implementing electricity restructuring, in light of the problems in the California market in late 2000 and early 2001 when high prices and rolling blackouts were blamed partially on the state’s deregulation scheme. The Study Commission is currently focused on determining whether there is or will be environment  to foster wholesale competition and ensure a viable supply of electricity.

Where do North Carolina electric cooperatives stand?

The electric cooperatives have a very simple position on this complex issue -- CONSUMERS FIRST! If consumers benefit from changes in the electric industry, then we're gung-ho in favor of it. Electric cooperatives are owned by their consumers, therefore, any changes that benefit them, they support; conversely, changes that disadvantage them, they oppose.

The twenty-seven electric cooperatives represent more than 2.4 million North Carolina customers -- and 99% of these customers are households and small commercial businesses. To date, the changes the states that have adopted deregulation plans have made do not show any benefited residential and small business.

Does this mean that we're "just saying NO"? Absolutely not. NC's electric cooperatives are helping electric cooperatives in other states that have moved ahead so that we can -- first hand -- see what works and what doesn't. As Pennsylvania was moving forward, NC electric cooperatives sent full-time staff to Harrisburg to work with them in setting up the rules of the road and business systems to accommodate deregulation changes. NC electric cooperatives have been working for more than two years with cooperatives in New York City who are putting consumers' electric needs together to create a larger buying unit to gain market leverage. This is called "aggregation" and it's basically a cooperative model of doing business. Other states have adopted cooperative/aggregation models, for example, Ohio, as a way that ordinary electric consumers can work together to seek better electricity prices. The NC electric cooperatives have joined with other power supply cooperatives to become larger wholesale market participants and help lower overall risk.

North Carolina's electric cooperatives are very active in the changing marketplace -- for a single purpose -- to ensure the 2.4 million residential and small business owners who own the cooperatives -- have a seat at the negotiation table which shapes any electric utility deregulation plan in North Carolina and be able to bring real-world experiences to determine what works and what doesn't.

America's electric cooperatives, particularly those in North Carolina,  want to ensure that American families and small businesses nationwide benefit from any federal or state changes in the regulation of the electric utility industry. North Carolina's and America's electric cooperatives believe if the market is structured fairly, consumers everywhere can use the cooperative business model to protect themselves and foster true competition.
 
How far has restructuring progressed?
 
At the federal level, electric utilities have traditionally been regulated as monopolies. This means that in states that have not passed electric utility restructuring legislation, utilities do not "compete" and are in fact forbidden to compete with other electricity providers for customers in their service territory.

In 1992, Congress restructured the wholesale electricity market with The Energy Policy Act of 1992. The 1992 Act opened the industry to competition in the wholesale electric power market - that is, the electric power that is bought and sold between utilities and other power generators. Competition at the wholesale level has spurred calls for competition at the retail level - the sale of energy and energy services directly to homes and businesses large and small.

As a result of the 1992 Act, there are more electric power suppliers in today’s market. Since passage of the 1992 Act and retail restructuring legislation in several states and the District of Columbia, many new electricity suppliers have emerged to compete with so-called "traditional" electric utilities in the wholesale and retail electricity markets.
 
These other electricity suppliers include cogenerators, small power producers, independent power producers, and merchant generators and power marketers. The role of power marketers, especially, has changed in today's electricity marketplace. (Enron has been the leading power marketer on the scene and in late fall experienced a financial collapse.) Power marketers traditionally do not own electrical generation, transmission, or distribution assets. Instead, they buy and sell bulk power as a commodity.
 
What is the impact of Enron's bankruptcy? 

The collapse of the giant power marketing company Enron has several experts questioning its impact on the future of electric deregulation. Enron, an energy trading company based in Texas, championed deregulation in energy markets nationwide. "We initiated the wholesale natural gas and electricity markets in the United States," the company boasted on its Web site.

"Enron was the most visible and ardent cheerleader of deregulation, and I think what's happened to them is going to raise all these questions about deregulation," said Jim Owen, spokesman for the Edison Electric Institute, in news reports about Enron's collapse in late November.

CBS Marketwatch, however, guessed that other power marketers will rise to fill the void. "Is the industry losing the most vocal advocate of unregulated markets? "Yes," said Christine Uspenski, an analyst with Schwab Capital Markets'Washington Research Group. "But I don't think that the work that Enron has done to date will end up being wasted."

Does the collapse affect North Carolina's electric cooperatives ?
 
No. North Carolina Electric Membership Corporation, the power supplier for 26 of the state's 27 electric cooperatives, does not have any significant business with Enron.