Restructuring
Published: September 3, 2006, 7:55 pm
Updated: September 3, 2006, 7:55 pm
This article has been reviewed by the following Topic Editor:
Cutler J. Cleveland
A system of 345 kv transmission lines. Photo: OSHA
Restructuring refers to the reorganization of traditional monopoly electric service to allow operations and charges to be separated or unbundled into generation, transmission, distribution and other services. This will permit customers to buy generation services from competing suppliers. Changes in the regulatory and corporate structure of the electric power industry are transforming it from a system of fully regulated monopolies to one in which competition is allowed or required in certain portions of the industry. Traditionally, vertically-integrated monopolies provided electricity generation, transmission, and distribution services to captive customers. Following restructuring, these services were separated, either functionally within one company, or physically with different companies offering different services. Several states that have "restructured" required jurisdictional electric utilities to sell off their generation assets to independent companies. Expectations that competitive forces would lead to more efficient prices than government regulation spurred restructuring. In the US, restructuring at the wholesale level began in the mid 1990s with the Federal Energy Regulatory Commission's (FERC) rule on open access to the transmission system. In response to this rule, and under pressure from large industrial customers seeking lower rates, regulators in several US states issued rules that moved to retail competition in the generation sector. Many municipalities own their own electric systems and were not required to make the same changes to their businesses. There are strongly divergent opinions on the success of restructuring. The term "privatization" refers to the change from government to private ownership as occurred in the electric industry in the UK in the early 1990s. The term "deregulation" is sometimes used interchangeably with "restructuring" but implies a greater reduction in regulation than has actually occurred in the US electric industry.
Further Reading
Federal Energy Regulatory Commission Homepage
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Citation
Jeannie Ramey (Lead Author);Cutler J. Cleveland (Topic Editor) "Restructuring". In: Encyclopedia of Earth. Eds. Cutler J. Cleveland (Washington, D.C.: Environmental Information Coalition, National Council for Science and the Environment). [First published in the Encyclopedia of Earth September 3, 2006; Last revised Date September 3, 2006; Retrieved June 19, 2013 <http://www.eoearth.org/article/Restructuring>
The Author
Jeannie Ramey is a Research Associate at Synapse Energy Economics, where she is responsible for a variety of consumer and environmental issues related to the restructuring of the electricity industry. Prior to working at Synapse, she was an Economist in the Electric Power Division of the Massachusetts Department of Telecommunications and Energy, where she was responsible for consumer education about electric industry restructuring; analysis of utility demand-side management programs; participati ... (Full Bio)
A system of 345 kv transmission lines. Photo: OSHA
Restructuring refers to the reorganization of traditional monopoly electric service to allow operations and charges to be separated or unbundled into generation, transmission, distribution and other services. This will permit customers to buy generation services from competing suppliers. Changes in the regulatory and corporate structure of the electric power industry are transforming it from a system of fully regulated monopolies to one in which competition is allowed or required in certain portions of the industry. Traditionally, vertically-integrated monopolies provided electricity generation, transmission, and distribution services to captive customers. Following restructuring, these services were separated, either functionally within one company, or physically with different companies offering different services. Several states that have "restructured" required jurisdictional electric utilities to sell off their generation assets to independent companies. Expectations that competitive forces would lead to more efficient prices than government regulation spurred restructuring. In the US, restructuring at the wholesale level began in the mid 1990s with the Federal Energy Regulatory Commission's (FERC) rule on open access to the transmission system. In response to this rule, and under pressure from large industrial customers seeking lower rates, regulators in several US states issued rules that moved to retail competition in the generation sector. Many municipalities own their own electric systems and were not required to make the same changes to their businesses. There are strongly divergent opinions on the success of restructuring. The term "privatization" refers to the change from government to private ownership as occurred in the electric industry in the UK in the early 1990s. The term "deregulation" is sometimes used interchangeably with "restructuring" but implies a greater reduction in regulation than has actually occurred in the US electric industry.
Further Reading
Federal Energy Regulatory Commission Homepage
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