Deregulation of utilities in the United States

Deregulation of utilities in the United States
Name	Deregulation of utilities in the United States
Jurisdiction	United States
Started	1970s
Key legislation	Public Utility Regulatory Policies Act of 1978, Energy Policy Act of 1992, Telecommunications Act of 1996

Deregulation of utilities in the United States began in the late 20th century as a series of policy shifts that moved oversight and market entry from traditional regulated monopolies toward competitive markets, affecting electricity, natural gas supply, telecommunications, and to a limited extent water supply services; proponents included pro-market policymakers and think tanks while opponents included public advocates and labor unions. Early catalysts included the 1973 oil crisis, regulatory decisions by the Federal Power Commission, and landmark statutes such as the Public Utility Regulatory Policies Act of 1978 and the Telecommunications Act of 1996, which reshaped interstate frameworks and state regulatory authority.

Historical background and policy drivers

The push for reform drew on ideas advanced by scholars and institutions like Milton Friedman, the Heritage Foundation, and the American Enterprise Institute, responding to crises exemplified by the 1973 oil embargo and policy responses by agencies such as the Federal Energy Regulatory Commission and the Federal Communications Commission; landmark court rulings including FERC v. Mississippi Public Service Commission and legislative acts like the Energy Policy Act of 1992 further accelerated restructuring. State actors including the California Public Utilities Commission, the New York Public Service Commission, and governors such as Ronald Reagan and Bill Clinton influenced reform trajectories alongside industry incumbents such as General Electric, AT&T, and ExxonMobil, creating coalitions with trade organizations like the National Association of Regulatory Utility Commissioners and the American Gas Association.

Electricity deregulation

Electricity restructuring created wholesale markets administered by independent system operators like PJM Interconnection, California Independent System Operator, and New York Independent System Operator while retail choice was adopted in states including Pennsylvania, Texas, and California, influenced by FERC Orders such as FERC Order 888 and FERC Order 2000. Market design debates referenced actors and events like the Enron scandal, the California electricity crisis, and companies such as Dynegy and AES Corporation, while state statutes such as the Electric Restructuring Act (Pennsylvania) and the Texas Senate Bill 7 (1999) operationalized retail competition. Technical and reliability concerns engaged entities including the North American Electric Reliability Corporation and the U.S. Department of Energy.

Natural gas deregulation

Natural gas reform followed major milestones including the Natural Gas Policy Act of 1978, the Decontrol of natural gas prices under President Jimmy Carter, and FERC orders that supported open access such as FERC Order 436 and FERC Order 636, prompting pipeline companies like Kinder Morgan and marketers like Shell Oil Company to expand trading and storage markets. State public utility commissions and firms such as Enron and Williams Companies participated in evolving spot and futures markets traded at hubs like the Henry Hub and regulated under statutes including the Commodity Exchange Act and oversight by the Commodity Futures Trading Commission.

Telecommunications and broadband deregulation

Telecommunications deregulation was driven by the breakup of AT&T under the Modification of Final Judgment (1982), the passage of the Telecommunications Act of 1996, and actions by the Federal Communications Commission that affected carriers including the Bell System incumbents, competitive local exchange carriers like MCI, and cable companies such as Comcast. Broadband and internet policy engaged firms like Verizon Communications, AT&T Inc., and platform actors such as Google and regulatory debates involving the First Amendment and Net neutrality controversies adjudicated by the United States Court of Appeals for the District of Columbia Circuit and the Supreme Court of the United States in related precedents.

Water and wastewater services reforms

Reform of water and wastewater services has been more limited but included privatization experiments with firms like American Water Works Company and Veolia Environnement in municipalities such as Atlanta and Milwaukee, contract models exemplified by concession agreements with entities including the World Bank and the International Monetary Fund in policy advice, and regulatory interactions with state agencies like the California State Water Resources Control Board and federal laws including the Safe Drinking Water Act and the Clean Water Act that constrain market redesign.

Economic impacts and consumer outcomes

Empirical evaluations by scholars at institutions such as Harvard University, Stanford University, and the National Bureau of Economic Research documented mixed outcomes: electricity and natural gas reforms produced wholesale price signals and entry for firms like AES Corporation and Kinder Morgan but also episodes of price volatility tied to market manipulation scandals such as Enron; telecommunications reform led to innovation by companies including Cisco Systems and Sprint Corporation while also spurring consolidation culminating in mergers like AT&T–Time Warner-era deals and disputes adjudicated by the Department of Justice. Studies by think tanks including the Brookings Institution and the Cato Institute and regulators such as FERC report heterogeneous effects on consumers, with benefits in some jurisdictions and adverse distributional impacts documented in analyses of the California electricity crisis and municipal water privatizations.

Regulatory frameworks and federal-state roles

Deregulation created layered authority among federal agencies including FERC, the Federal Communications Commission, and the Environmental Protection Agency and state regulators such as the New York Public Service Commission and the California Public Utilities Commission; statutory frameworks like the Public Utility Regulatory Policies Act of 1978, the Energy Policy Act of 1992, and the Telecommunications Act of 1996 delineated preemption, open access, and competition mandates. Legal disputes have reached the Supreme Court of the United States and federal circuits, shaping doctrines on preemption, federalism, and regulatory takings in cases involving utilities, municipal authorities, and private firms including Enron, AT&T, and American Water Works Company.

Category:Energy policy in the United States