Provider of last resort in emerging electricity markets: Lessons from telecommunications deregulation

Abstract

A regulated network service provider of an essential service is often required to serve as a Provider of Last Resort (POLR). This obligation has traditionally entailed three fundamental elements: 1) connect customers to the grid so that service is universally available in the monopoly franchise territory (universal service obligation); 2) offer service of comparable quality in all areas of the monopoly franchise territory at comparable rates; and 3) assure a resilient network that withstands sudden service interruptions and recovers quickly from outages. However, these POLR obligations may need to be adjusted when a utility’s monopoly begins to erode, e.g., as a result of competitive entry, technological change, a public policy shift, and/or deregulation. This paper draws on experiences in the gradual deregulation of the telecom industry that offer insights for developing effective public and regulatory policy with respect to POLR obligations, as the electric utility industry experiences competitive entry.