Why is the electricity industry restructuring?

In the 1980s the need for regulation of many industries was questioned. That included the electricity industry. Proponents of deregulation felt that competition and reduced government regulatory costs would result in increased supply and lower prices.

Many industries that depended on electricity called for deregulation. They didn’t want to pay for the excess capacity that was included in electricity rates. They hoped for new forms of cheaper generation. The large electricity customers also thought that competition among electricity generators would reduce costs. These benefits to deregulation had already been observed in other industries, such as the telephone industry.

Opponents were concerned that an end to regulation would result in periods of very high prices for electricity. This was because electricity cannot practically be stored, unlike other forms of energy.

Many parts of the world had already deregulated their power industries. These include parts of the United States, Europe, South America, Australia and New Zealand. In each country, for practical reasons, transmission and distribution were maintained as regulated monopolies.

However, in many cases government-owned generation assets were sold to the private sector. Deregulation of electrical power has been very successful in some areas, for example Great Britain. Other areas have had problems, such as high prices and questionable corporate practices. California is one example of this.

In Canada, the provinces control electricity and the pattern of deregulation is mixed.