Public policy responsibilities in a restructured electric industry: An analysis of values, objectives, and approaches

Abstract

Discussions and decisions in states as diverse as California, Wisconsin, and Rhode Island are focusing on moving the United States electric industry from one dominated by vertically-integrated and highly regulated utility-based electricity monopolies to one characterized by largely divested and independent generation, transmission, and distribution sectors and by vigorous wholesale and retail competition. Numerous issues must be solved for this transition to be successful. Three of the most important are how to deal with stranded investments, how to provide open access to transmission systems, and how to deal with potentially stranded benefits, which is the current term being used to describe environmental and social programs such as demand-side management, low income programs, and renewable energy. This report explores how to meet public policy responsibilities, which are growing more acute, in a proactive fashion in a restructured United States electric industry. The specific goals of this report are to (1) assess trade-offs in the short-term in meeting public policy responsibilities associated with stranded benefits and (2) introduce a series of new ideas that, if enacted, could substantially satisfy important public policy considerations.