Deregulation of the Electrical Industry :: essays papers

Deregulation of the Electrical Industry The roots of newfangled day regulation can be traced either the way dorsum to thelate 1800s and found in the form of antitrust. By the beginning of the twentieth century, the U.S. giving medication had formed the interstate Commerce Commission to regulate the stun perseverance, and shortly thereafter, many other regulatory commissions were founded in the transportation, communication, and securities fields. The main destruction of these regulatory commissions was to pee a reasonable rate structure that would be appealing to both producers and consumers. While this system has worked for many years, it has recently semen under heavy criticism, with many people pushing for open rivalry among electric automobileal power producers. Although once believed to be an impossible proposal, competition among electric power producers is finally a reality in a a few(prenominal) areas. Massachusetts is just one state where legislation impl emented to create competition among electric power producers is not only favored by the people of the state, just now has also provided significant rate reductions as well. The try on at regulating price in the electric industry is a troublesome one. The objective is not only to minimize the cost to consumers, but also to create a rate structure that result tempt the electric association to remain in the industry. The regulatory commission wants the electric company to have a reason to innovate so that they will be able to provide cheaper power in the future. However, if the commission captures all gains from innovation in the form of lower prices, then the electric company has no incentive to undertake any type of innovation. Therefore, a agree must be reached which would provide adequate incentives for firms to undertake cost-reducing actions while at the same time ensuring that the price for consumers is not exorbitant. The term regulation refers to government tal lyled restrictions on firm decisions over price, quantity, and entry and exit. Each factor of an industry must be regulated for producers and consumers to truly benefit. The control of price does not mean setting one fixed price, but rather entails the initiation of a price structure for purchasing electricity during peak and non-peak times. The control of quantity refers to the governments attempt to control the amount produced or in this sequel the amount of electricity produced. For example, in the electric industry, it