Deregulation may be more costly

U.S. utility customers in competitive markets are paying more for electricity than they would if costs had remained regulated, a new study shows.

A report issued by the Carnegie Mellon Electricity Industry Center in Pittsburgh concludes that rising fuel costs aren’t the sole cause for increasing retail power prices.

“We find an average difference of 2 to 3 cents per kilowatt-hour between prices and costs that is explained by restructuring rather than by increases in fuel prices,” according to the report, produced from a study conducted by Carnegie Mellon professors Lester Lave and Jay Apt and Seth Blumsack, an assistant professor at Penn State University. “Restructuring has been beneficial to companies that restructured, but the evidence is far less clear concerning benefits to consumers.”

Average U.S. retail power prices climbed 9.3% to 8.9 cents per kilowatt-hour in 2006, the largest increase since 1981, according to the Energy Information Administration, the statistical arm of the Energy Department. The Federal Energy Regulatory Commission last month proposed new rules to improve competition in wholesale power markets amid criticism of rising electricity costs.