International Antitrust Law & Policy: Fordham Corporate Law 2001 - Hardcover
International Antitrust Law & Policy: Fordham Corporate Law 2001 - PDF
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Chapter 16
EMERGING ANTITRUST ISSUES IN THE
TRANSITION TO DEREGULATED
ELECTRICITY MARKETS
Mike Naeve & Jerry L. Pfeffer†
I. INTRODUCTION
Electric power is the most recent illustration of a large U.S. industrial
sector in which the historic rationale for economic regulation has been
challenged by technological innovation and changing market dynamics. In
particular, diminishing scale economies in generation and the relaxation of
legal barriers to market entry have eliminated much of the need for economic
regulation of the generating sector of the industry. Experience over several
decades shows that such regulation is neither an effective means of
simulating market outcomes nor costless as measured by the inefficiencies
and burdens it imposes on power suppliers and consumers.
The Federal Energy Regulatory Commission (‘‘FERC’’ or ‘‘Commission’’)
and many state public utility commissions (‘‘PUCs’’) have adopted new rules
to facilitate the development of competitive electricity markets and allow
customers to choose their electric power supplier. However, the experience
derived from other recently deregulated U.S. industries and energy deregulation
in other countries suggests that the potential efficiency gains from
competitive power markets may take a decade or longer to be fully realized.
Further, as illustrated by the UK experience in the 1990s and recent events in
California, realization of these consumer benefits could be thwarted if
markets are poorly designed or dominant firms are perceived to be exploiting
market rules to the detriment of consumers.
Ensuring the benefits of competition as traditional economic regulation is
relaxed will require periodic market intervention by regulators and effective
antitrust enforcement. Such enforcement is especially difficult while the
industry continues to be subject to a mix of regulation and competition in
different market segments and political jurisdictions. The purpose of this
paper is to identify and discuss some of the key antitrust issues that must be
addressed by utility regulators and the antitrust agencies as the U.S. electric
power industry continues its transition to a competitive market structure.
Skadden Arps Slate Meagher & Flom, LLP, Washington.
