The History of Energy Deregulation (in brief)
November 16th 2017
The origins of the current system of energy production and delivery date back to the New Deal era, when Congress brought an end to the tight reign of large interstate holding companies that controlled more than 75 percent of the country’s electric generating capacity. The Public Utility Holding Company Act of 1935 (PUHCA) forced the holding companies to break up, and gave utilities a government-sanctioned monopoly over a limited territory. In exchange, utilities agreed to provide reliable electric service to all customers at a regulated rate. The law resulted in the formation of nearly 300 power systems and 800 rural cooperatives, reports Congressional Quarterly.
OPEC’s worldwide oil embargo in 1973 had a dramatic impact on the electric industry. Although the embargo was most famous for creating interminable lines at the gas pump, it also produced sharp increases in electric utilities’ costs. The result was a surge of interest in alternative forms of energy. In 1978, Congress passed the Public Utility Regulatory Policies Act (PURPA) requiring utilities to use "renewable" energy, which is produced from wind, solar, and other sources. Both PUHCA and PURPA would later be viewed as impediments to workable national electricity deregulation.
By the 1990s, a growing chorus of voices within the electricity industry, Congress, and the federal government was pushing to bring competition to the industry. Congress opened the system to competition in 1992 with the National Energy Policy Act, which allowed power producers to compete for the sale of electricity to utilities. In 1996, the Federal Energy Regulatory Commission (FERC) issued what would become one of its most famous orders. Order 888 required utilities to open their transmission lines to competitors. Soon thereafter, New Hampshire launched a pilot program allowing competition, as did Arizona, California, Massachusetts, Pennsylvania, and Rhode Island. These actions at the state level fueled the fire for a national deregulation plan.
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