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Power company deregulation sparks debate
August 30, 1996
Web posted at: 5:10 a.m. EDT
From Correspondent Ed Garsten
JACKSON, Michigan (CNN) -- Electricity. It's one of those things for which you don't have to use any brainpower.
You know the electric company nearest you is the one you're hooked up to and the one to which you send your bill. But what if you could shop around for the cheapest power?
It's a trend that's taking the nation by storm. In fact, 41 states are hoping to create a cheaper power choice by deregulating power companies to create competition.
"The hope is, you have more competitors, more customer choice, and hopefully in the long run, that will in fact mean lower prices," said John Strand, chairman of the Michigan Public Service Commission.
Right now, the same power company that generates your electricity sends it out over transmission lines and into your home or business.
Under deregulation, that power company would still generate electricity, but customers would buy the power from a retail provider. Still another company would charge for the use of transmission lines.
It's a method called retail wheeling, and it's been tested in Illinois and New Hampshire.
"In both of those areas in which residential customers have been allowed to participate, rates have declined 15 to 20 percent," Strand said.
Hidden costs?
But critics of deregulation say there's a costly catch to consumers. Power companies that have spent millions on generators and transmission lines aren't going to let customers get away without first anteing up.
Power companies make up their losses by jacking up the stranded costs -- the money spent on a power company's infrastructure.
One energy consultant says the whole idea is to make cheaper power available for large industrial users while sticking it to the residential customer to pick up the stranded costs.
"If you're a large customer and you can reduce your price by 20 or 30 percent, as our study showed in Michigan, by increasing residential rates by some 30 percent, the industrials win, the consumers lose and that's not fair," said Charlie Macinnis of the Consumers Power Company.
Ford Motor Company, which spends about $300 million a year on power, says it needs to cut rates to keep car prices down.
"Our products manufactured at our facilities compete against products manufactured across the world, and we have to find ways to make them competitive," said Geoffrey Crandall, energy consultant.
And while the thought of power shopping might be fun for some folks, shopping for power may simply be too draining.
Related sites:
- Consumers Power Company
- Ford Motor Company
- Michigan Public Service Commission
- The Power Marketers Association Online
External sites are not endorsed by CNN Interactive.
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