The first step in regulated the US
electric industry occurred during the 1930s when larger firms successfully
lobbied with state governments to create franchise monopolies and eliminate
competition in the industry. In return, the state governments received reliable
tax revenue as a share of the monopoly profit. Abundant energy resources have
kept the price of electricity low since.
The main cost of electricity is fuel. Coal
remains the main fuel. Natural gas burns cleaner and has become cheaper.
Hydroelectricity is reliable but limited due to environmental limits of
building more dams. Nuclear generation will become more important over the
coming decades. Alternative energy sources can eventually provide enough power
for household consumption.
The price of electricity will depend
mostly on fuel costs. Retail competition allows customers to choose suppliers.
Customers in high priced states like California, New York, and Florida want to
buy from low priced exporting states like West Virginia, Idaho, and Alabama.
Retail competition will raise prices in the low priced states, and not lead to
much change in the average price.
The best policy to keep the price of
electricity low is to rely on competition. Consumers facing higher prices for
electricity will economize. The price of electricity ultimately depends on
investment by the industry.