UtiliCorp: 'Patchwork' Unbundling Slow to Develop
Despite the advent of retail gas and electric competition in
states such as California, Georgia, Ohio and Pennsylvania,
UtiliCorp United officials do not regret their decision earlier
this year to shelve retail commodity marketing and disband the
EnergyOne partnership with PECO Energy. The outlook for retail
competition is still quite bleak, UtiliCorp Chairman Richard C.
Green, Jr. said last week at a press briefing in Washington, D.C.
The status of the retail market has not changed, and regulators and
legislators still appear headed in the wrong direction.
Although 18 states, representing 46% of the U.S. population, are
implementing open access this year, with most reaching full
implementation by 2003, that cannot be considered the fast track to
"robust" retail competition, according to Green. "The bottom line
[is that] we may very well end up facing something far short of the
robust competition that can provide the broad range of benefits the
American consumer expects and deserves," he said. The states are
still headed toward a "patchwork quilt" of regulations that will
produce at best "light competition."
"And while a tremendous burden to us, it may be politically
expedient for Congress to simply permit the patchwork to continue."
Just the threat of competition has already forced power prices to
decline. Competition in the wholesale power market will put added
pressure on prices. "So there will be an irresistible temptation to
believe.that we in fact have robust competition" when, in fact, we
Evidence that the industry is beginning to realize competition
is a long way off can be seen in the recent decline of merger
activity. "With deregulation essentially not moving forward, the
urgency to consolidate, to think about those competitive
strategies, is not there," said Green. "You're not compelled to
Green offered three suggestions for regulators and legislators:
"What they really need to do is.recognize that as soon as they even
hint that there is any competitive market coming that the spirit of
competition begins right there. The competitors are right there in
their face, smiling, deciding how they can skew the market
structure in their favor. And that could tilt and delay a good
market going forward. Secondly, they need to go over the wall and
understand that competition is the best regulator of the industry
going forward. And thirdly, they need to recognize where the burden
of proof should be. The burden of proof needs to be with the one
that offers the restriction, [the regulators]. To prove that this
restriction does enhance the competitive market as opposed to cause
an advantage for some of the competitors in the market."
In an interview with NGI, Green said the overriding message is
that the states need to get on the same time line and start with a
"common path of rules so that there's definition in the
marketplace." Exactly what those rules should be he wouldn't say.
But Green thinks the incumbent utility should be able to compete in
"It needs to start with some framework legislation at the
federal level, and I say framework because I'm not saying mandates.
I think it's important that it is recognized that we're talking
about a national marketplace. I am pessimistic that a lot will
occur soon. I think inevitably it will happen over time. It will
just take long. I think next year there will be some restructuring
legislation, but I think it will be a very small first step. But at
least it's a first step."
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