Chapter VII - Business Strategies Evolving in Response to Regulatory Changes in the US Electric Power Industry

Abstract

This chapter reviews the institutional changes and their impacts on the business strategies being pursued by both traditional utilities and new independent players in the U.S. power market. The electric power industry is a major sector of the U.S. economy. For the past 90 years, this industry has been treated as a natural monopoly. Vertically integrated utilities have operated within designated local geographic retail franchises, subject to pervasive regulation of prices, service quality, investment, and protection from entry by competitive rivals. These local monopolies typically owned or contractually controlled sufficient generation to serve the demands of their franchised retail customers. For their part, retail customers had little choice but to purchase all their electricity from the local monopoly utility. The aim of this chapter is to explore the many ways in which U.S. companies are responding strategically to the changing regulations and radically reshaping the U.S. and international electric power industries.