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Electricity industry restructuring not the cause of consumers’ price pain, according to Bates White economists Collin Cain and David DeRamus
WASHINGTON, D.C., December 15, 2006—Collin Cain, M.Sc., and David DeRamus, Ph.D., economists at Bates White, LLC, have published an article that contends consumers are better off, in both the short and long terms, under restructured electricity markets. The article, “The Fallacy of High Prices,” written with Howard J. Axelrod, an independent expert, appears in the November 2006 issue of Public Utilities Fortnightly.
Sharp increases in retail electric rates have piqued both consumers and politicians, who, the authors contend, have mistakenly focused on restructuring in the industry as the cause of rising prices. The authors provide evidence to counter both this belief and politicians’ calls for a return to traditional rate regulation. They discuss how wholesale competition in restructured markets, especially in the eastern United States, has benefited consumers.
Restructuring, the authors conclude, has lowered wholesale and retail prices (after the effect of increased fuel prices is taken into consideration) and shifted significant risks away from customers to generators, who are better able to address those risks. The authors suggest that a less politicized regulatory environment could provide even more benefits to consumers, especially in light of uncertainties arising from Middle East conflicts and evolving environmental policies.
David W. DeRamus is a Partner and founding member of Bates White. He directs Bates White’s Energy Practice and has served as a testifying and consulting expert in market power proceedings before the Federal Energy Regulatory Commission, breach of contract cases, and other commercial litigation.
Collin Cain is a Manager in Bates White’s Energy Practice. He specializes in developing and assessing power procurement and sale strategies for regulators and corporations. He also has extensive experience developing risk analysis and energy market pricing models.
Howard Axelrod is President of Energy Strategies Inc.
Public Utilities Fortnightly is a national journal that focuses on competition, mergers and strategic alliances, emerging trends, legal issues, restructuring initiatives, new policy, and technology advances.
About Bates White
Bates White is a national economic consulting firm of more than 150 professionals.
Established in 1999, Bates White offers consulting services in economics,
finance,
and business analytics. Bates White has offices in Washington, D.C., and San
Diego, Calif.
www.bateswhite.com
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