In deregulation of electric markets, a consumer pinch
Competition was supposed to lower prices in deregulated states. But faster-rising rates there are spurring a backlash.
It's the slow season for the laundromat in tiny Milford, Pa., yet owner Darryl Wood has raised the price of a wash by 50 cents this year, to $2.50. The reason? Electric rates have more than doubled since January, threatening to close the lid on a business his family has run for decades.
"I've already seen an electric bill higher than anything that I've ever gotten," he says. "I thought deregulation would bring rates down. Now, I'm just hoping we can hang on."
His ordeal reflects the fresh dismay many consumers are feeling about the deregulation of the electric utility industry. When deregulation was implemented in the 1990s, supporters said it would drive rates down through competition.
But data so far suggest that rates in deregulated states are rising faster than those in regulated states. That trend could expand as caps on retail electric rates, which have held prices down, are lifted in at least six deregulated states this year.
The issue is heating up:
• In Maryland, where homeowners were threatened with a 72 percent rate hike this summer, deregulation is suddenly a major issue in the governor's race.
• In Delaware, where Delmarva Power set forth rate jumps of at least 59 percent, lawmakers responded by phasing them in over several years and requiring power companies to do long-term planning.
Price comparisons are limited because rate caps are only just being removed. But in New England, where many caps came off last year, retail electric rates surged about 15 percent - except for Vermont, where regulated rates are roughly flat. In the Mid-Atlantic region, rates in deregulated New York have risen 16 percent since 2002, while rates in still-regulated West Virginia were about flat.
Such unexpected disparities are prompting a backlash in states that recently allowed markets to set wholesale and retail pricing. And it's fueling a debate over what went wrong.
Page 1 of 5