It is important to keep in mind that the industry did not seek deregulation but, once the road became clear, moved down the path in creative and often effective ways. Freezing rates, forcing reductions in infrastructure investments, demanding asset divestitures came not at the behest of utility executives. In fact, many would argue it was not deregulation that kept prices low for consumers but re-regulation and demands for stable rates as a temporary measure to appease the public while, correctly so, compensating investors for building the necessary power plants and related infrastructure.

We have further ignored our electricity needs for a growing consumptive society in many parts of the nation. The uncertainty in the future has negatively affected the manner in which we produce power and we have severed the relationships between the obligation to serve, the need for integrated resource planning and the requirements of the environment. Having placed all of the nation’s eggs in the natural gas basket (despite coal’s dominance and nuclear power’s excellent record) we sit and wonder why we are living with higher prices.

For those regions of the country where deregulation has taken hold, it is critical to recognize that prices move in both directions and be allowed to do so if the suggested advantages of open markets are to be realized. Reacting by placing blame may be politically expedient and allow for plausible deniability but does not allow market signals to be truly expressed.

The country has just seen the beginning of higher electricity prices for another key reason: uncertainty in the marketplace has caused a significant lack of infrastructure investment. While the dollars being invested have been thankfully increasing, it is still behind what is necessary to build the infrastructure for the future. The lack of investment is clearly justifiable from the perspective of the utilities and their investors—but society is already paying the price daily for power unreliability by some estimates as high as $100 billion a year.

Lest we think this is only a challenge for the investor owned utility, public power is facing the same issues as it has also fallen prey to the reliance on a single source for its generation needs and tries to traverse the same aging infrastructure.

The solution comes to the five points developed in the Electricity Sector Framework for the Future, developed by the not-for-profit Electric Power Research Institute two years ago and not by trying to squeeze electric utilities once again. That report, a collaborative effort of more than 250 organizations pointed to Stabilizing Markets, Providing for the Public Good, Empowering Consumers, Unleashing Innovation and Protecting the Environment as the keys to the 21st Century. Those recommendations are as powerful today as they were when released just after the August 13 Northeast/Midwest Blackout.

What are the five main conclusions reached in the Framework?

• Stabilizing Markets: Competitive markets thrive when there is an active, open platform for participants to engage in trading, including caps, collars and futures backed by real assets. The industry has cycled between the wild and wooly days of pre-Enron trading and huge market expectations to a lack of liquidity and fluidity. Once a true marketplace is established strength can return to the business.

   

• Providing for the Public Good: There is a fine balance between a truly open market and a fully regulated marketplace. Lost in much of the discussion has been the industry’s 100 year history of providing service on an equal basis. The electricity enterprise has a proud history of customer service and managing for contingencies for all classes of customers. There has been a disconnect between the needs of the public and the desire to create open markets.

   

• Empowering Customers: This is not a call for open markets, but rather for allowing the customer to be engaged in the process of buying electricity (or gas for that matter). Providing an after-the-fact report card (the monthly bill) does little to influence behavior and, in fact, may create frustration and disinterest. The customer needs information and the ability to do something about their consumption in order to be truly engaged and to become a force in the active management of their use.

   

• Unleashing Technology: Decades of under investment in technology and the lack of a bridging strategy to the future, coupled with the needs of increased power quality and reliability open the door to the most powerful transition of all. Some signs of advanced technology are appearing as firms move to the Intelligrid and relate smart technologies. More needs to be done to promote advancement. Ultimately it is advanced technology and control that can lower costs.

   

• Protect the Environment: Environmental protection and the future of the energy business are inextricably linked. A balanced approach including fuel diversity, demand response and energy efficiency is needed to make the system work. Focusing solely on a single fuel or single aspect will not allow for a robust system.