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USA Report

The document discusses the deregulation and restructuring of the U.S. electricity markets, highlighting historical perspectives, legislative frameworks, and state case studies. It outlines the evolution from regulated utilities to competitive markets, emphasizing the challenges and lessons learned from states like California, Texas, and New York. The conclusion stresses the need for regulatory oversight to ensure consumer protection and grid reliability while fostering competition and innovation.

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Sunny Kumar
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9 views

USA Report

The document discusses the deregulation and restructuring of the U.S. electricity markets, highlighting historical perspectives, legislative frameworks, and state case studies. It outlines the evolution from regulated utilities to competitive markets, emphasizing the challenges and lessons learned from states like California, Texas, and New York. The conclusion stresses the need for regulatory oversight to ensure consumer protection and grid reliability while fostering competition and innovation.

Uploaded by

Sunny Kumar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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NATIONAL INSTITUTE OF TECHNOLOGY

HAMIRPUR

Deregulation and Restructuring of U.S.A

SUBMITTED BY:
E l e c t r i c i t y M a r ke t s
SUBMITTED TO:
SUNNY KUMAR
Prof. YOG RAJ SOOD
23MEE001
Content:
 USA MAP
 Historical Perspective
 Legislative Framework
 Utility Functions
 Market Restructuring
 State Case Studies
 Challenges and Concerns
 CONCLUSION
 REFERENCES
Introduction

Initially utilities were not regulated.


Early utilities would often compete for the same
customers including building duplicate distribution
systems. Naturally, competition was greatest in urban
areas. It was cheaper to compete in densely populated
areas & wealthy customers more likely to use power.
Historical Perspective
Historically, the cost of generating power declined as
utilities built ever-larger power plants, which increased
efficiency and reduced production costs.
Increased electric demand required more & larger
plants, which reduced costs further as well as
increasing the utility rate base. This era was a win-
win for everyone. Consumers had abundant, low- cost
power; regulators oversaw declining rates, increased
electrification, economic growth, utilities &
stockholders gained financially.
Utility Functions
The common vision of a utility three functions:
(1)Generation (electricity), or production (gas)
(2)transmission
& (3) distribution
Facts are that only a small fraction of the 3,200 or so
electric utilities, in the U.S., perform all three functions &
virtually no utility exists in isolation. Major investor owned
utilities (IOUs) do own generation, transmission, &
distribution.
Very few of the publicly owned utilities (POUs) own their
own generation or transmission.
USA Deregulation
Structure Outline:
• Federal
• State
• Utility
• Power Pool

Status of electric utility deregulation in each state in the U.S.


Legislative Framework:
Public Utility Holding Company Act of 1935 (PUHCA --
1935)
The Public Utility Holding Company Act of 1935 (PUHCA 1935) was a
United States federal law that regulated the ownership and control of
electric and gas utilities.
PUHCA 1935 required holding companies that owned electric and gas
utilities to register with the Securities and Exchange Commission (SEC)
and comply with various reporting and disclosure requirements. The act
aimed to prevent abuses such as unfair pricing, excessive debt, and
other practices that could harm consumers or investors.
The New York Blackout of 1965 and the Creation of
NERC:
The New York blackout of 1965 was a wake- up call to the power industry.
The industry responded to the blackout by creating a voluntary, utility-
managed reliability organization, the North American Electric Reliability
Council (NERC).
NERC divided the nation into ten reliability regions. The largest council is
the Western Systems Coordinating Council (WSCC). The smallest is the
Mid- Atlantic Coordinating Council (MAAC). Each reliability council
promulgates system planning & operating criteria that are intended to
ensure that each utility with generation or transmission assets builds &
operates them in a way that allows system controllers to preserve bulk
power reliability.
The 10 reliability regions of the North American Electric Reliability Council
1970’s Oil Embargo

The Oil Embargo of the 1970s changed things in a hurry.


Rapid increases in the cost of fuel to operate power plants
translated into equally large jumps in retail power prices.
Continued increases in oil prices & unstable fuel supplies led
electric utilities to construct new power plants that relied on
domestic coal and uranium. These plants cost much more to
build than simple oil or natural gas-fired generators.
Consequently, the fixed costs of utility operations increased,
further increasing retail electricity prices. The natural
consequence was consumer complaints & increased
regulatory oversight.
PURPA -1978
Federal Public Utility Regulatory Policies Act of 1978,
Section 210, (PURPA). This legislation created a new
legal category of power plants known as qualifying
facilities, QFs, & new market entrants called independent
power producers, IPPs. Contracts for power from QFs
typically covered the life of the plant, because the only
outlet for power from a QF was the local utility.
Subsequently, utilities asked Congress and state PUCs to
reform the power purchase requirements of PURPA.
Although Congressional action is still pending, PURPA did
create a new category of power producers.
Market Restructuring
• Separation of generation, transmission, and
distribution functions
• Introduction of competitive wholesale and retail
markets
• Creation of Independent System Operators
(ISOs) and Regional Transmission
Organizations (RTOs)
State Case Studies

• California
• Texas
• New York
California:
• California implemented one of the most ambitious deregulation
efforts in the late 1990s.
• The restructuring aimed to introduce competition in the
generation sector while maintaining regulated transmission
and distribution.
• The market experienced significant challenges, including the
California electricity crisis in 2000 and 2001.
• Factors contributing to the crisis included market manipulation,
flawed market design, and insufficient regulatory oversight.
• The crisis led to the partial re-regulation of the market and a
more cautious approach to further deregulation.
Texas:
• Texas is known for having a unique and largely deregulated
electricity market.
• The state's restructuring began in 1999 with the passage of
Senate Bill 7.
• The Texas model involves a competitive wholesale market
and a choice for consumers to select their retail electricity
provider.
• The Electric Reliability Council of Texas (ERCOT) manages
the grid and ensures reliability.
• While the Texas market has demonstrated benefits such as
increased competition and investment in renewable energy, it
also faced challenges during extreme weather events, such
as the winter storm in February 2021.
New York:
• New York initiated deregulation efforts in the late 1990s with
the goal of fostering competition and innovation.
• The state adopted a hybrid model known as "deregulation-
plus" or "re-regulation."
• The New York Independent System Operator (NYISO)
manages the competitive wholesale market and ensures grid
reliability.
• The New York Public Service Commission oversees retail
markets and consumer protection.
• The state has focused on promoting renewable energy and
achieving clean energy goals through market mechanisms
and incentives.
Challenges and Concerns

• Market Manipulation
• Price Volatility
• Consumer Protection
• Reliability and Grid Stability
• Transition Costs and Stranded Assets
• Regulatory Oversight and Market Design
Lessons Learned:
• The crisis demonstrated the importance of regulatory oversight in
deregulated markets and the need for policies that encourage
investment in new power plants to ensure an adequate supply of
electricity. It also showed the potential for market manipulation in
deregulated markets and the need for strong enforcement
mechanisms to prevent it.
• Competitive generation & transmission markets merge in the ISO,
despite the fact that the markets themselves operate independently. A
central point of control is necessary to ensure system reliability. ISOs
became the heart of the new competitive electricity industry & are
required by FERC to be broadly representative of all market
participants, not just transmission owners
What is there to learn from the experiences
of the U.S.A
• Increased Competition and Lower Prices
• Improved Efficiency and Innovation
• Risk of Market Power Abuse
• Complexity of Regulatory Reform
• Importance of Consumer Protection
• Role of Government in Facilitating
• Transition Environmental Considerations
• The Need for Continuous Monitoring and Adjustment
• The Importance of Public Trust
• he Interdependence of Markets
CONCLUSION
In conclusion, the deregulation of the USA power system
has reshaped the electricity industry, introducing
competition and stimulating innovation. Yet, it requires
careful regulatory oversight to address challenges and
ensure that the benefits of deregulation are realized while
safeguarding the interests of consumers and maintaining
grid reliability.
REFERENCES
• MacKay, A., and I. Mercadal (2022), “Deregulation, Market Power,
and Prices: Evidence from the Electricity Sector,” MIT CEEPR
Working Paper 2022-008, April 2022.
• Electric Utilities, Deregulation and Restructuring of U.S.A. Electricity
Markets.
• Federal Energy Regulatory Commission (FERC). (n.d.). Electric
,
Power Markets: National Overview.
• U.S. Energy Information Administration (EIA). (n.d.). Electricity
Deregulation.

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