Private and Public Responses to Market Failure in the U.S. Electric Power Industry, 1882–1942

Abstract

The electric utility industry, long viewed as one of the nation's most stable and predictable business sectors, has been characterized by increasing uncertainty and controversy since the cost and rate increases of the early 1970s. In terms of industry structure, questions have been raised regarding the costs and benefits of wider competition in an industry typified by vertically integrated monopolists. The relative impact of holding company structures on the industry as well as the relative merits of public ownership and management have been major areas of contention. Finally, the effects and proper role of federal, state, and local regulation with respect to the electric utility industry continue to be debated widely. Although such controversies may appear to be relatively new, they were in fact commonplace during the first half century of the electric utility industry's existence in the United States. Technological advances in the generation and transmission of electricity led to rapid growth and consolidation of the industry from 1882 to 1930. Over time, the industry came to be dominated by monopoly, privately owned operating companies controlled by interstate public utility holding companies and regulated by state public utility commissions. However, competition, public ownership, independent ownership, and (exclusive) local regulation each continued to exist in some markets.