backgrounder
Electricity Restructuring
The way electricity is produced and sold in the United States is undergoing an historic change. For a century, electricity has been generated and sold by utilities granted monopolies to supply customers in a given territory. Now, electricity generators are allowed to compete to sell electricity on a wholesale level to any utility anywhere they can transmit their power. In a number of states, electric companies are allowed to compete to sell power to individual retail customers -- households or businesses. Whether, how, and when to allow or to require retail competition for electricity customers is being debated in Congress and in every state in the country that has not yet made a decision.
The changes now being debated and enacted across the country are primarily intended to lower electricity prices by increasing competition among electric companies. That is a laudable goal, but what are the implications of electricity deregulation for other things we value, such as the environment and public health?
The answer depends on what the rules governing the new electricity market will be. If they ignore threats to the environment and public health, then electricity prices may well go down in the short term, but the overall quality of American lives will be diminished by increased pollution, global warming, disappearing wildlife and other looming dangers. Electricity generation is the source of 36% of the carbon dioxide contributing to global warming, to take just one example, and a significant shift toward coal as the main fuel in power plants (a likely result of some deregulation proposals) will only increase those emissions and electricity generation's share of responsibility.
And yet, if those new market rules are designed to promote cleaner, renewable energy sources such as wind, solar, biomass, and geothermal energy - all the while permitting robust competition and lower prices - then we may see significant improvements in all these areas. As several exhaustive studies have established, renewables offer a technically sound, economically feasible alternative to more polluting fossil fuels. The once-a-century restructuring of the electricity industry is an opportunity to ensure that the environmental performance of the industry is optimized along with the economic performance.
UCS is advocating seven simple, practical measures to switch America to clean, renewable electricity sources. They are:
- Renewable portfolio standards - a way to use market mechanisms to meet minimum targets for the production of electricity from renewable resources
- Public benefits funds - a way to make sure that public benefits, such as environmental improvement and fuel diversity, provided by renewables and other programs, like energy efficiency and service to low-income customers, are not ignored; and to ensure the that new technologies can be commercialized
- Net metering - a way to avoid penalizing homeowners and small businesses that elect to generate their own power
- Fair transmission and distribution rules - a way to make sure that renewable electricity producers can get their power to markets at a fair price
- Fair pollution rules - a way to make sure that old, dirty power plants have to meet the same pollution rules as new power plants, and to allow renewables credit for cleaning up air pollution
- Consumer information - a way to give consumers the information they need to choose clean electricity sources, if they wish
- Putting green customer demand to work - a way to make sure that competition allows all customers to choose clean energy sources.
Because of the historic restructuring of the electricity industry underway, it is critical to consider these policies during the restructuring process. However, most of the recommended solutions can also be implemented independently of the restructuring process. They need not wait for deregulation.
These seven ways are not all of the policies needed to deregulate the electricity industry successfully. Electricity deregulation is a very complex topic. But they will have critical impacts on the development of renewable energy resources and technologies.
Following these strategies will set America on a course toward a renewable energy future, one in which the environment and public health, on the one hand, and free-market principles, on the other, are fostered and respected.
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