Until just a few years ago, deregulation of the electric utility industry was at best a remote concept in the District.
But with proponents of deregulation claiming it will mean lower electric bills for consumers, nearly half of the states, including Maryland and Virginia, have bought into the premise by approving legislation to restructure the industry.
With Potomac Electric Power Co. having filed with the D.C. Public Service Commission to restructure its utility business, deregulation in some form will probably be approved by the District. Not only has Pepco filed a plan to restructure its utility business in the city, but the D.C. Council has pending before it a bill titled the Retail Electric Competition and Consumer Protection Act. Its purpose, among other things, is to set a timetable for implementing customer choice in the purchase of electricity.
The Public Service Commission, meanwhile, has until Dec. 31 to rule on Pepco's plan to divest its two generating plants in the District. The company's divestiture plan raises a host of complex issues related to utility deregulation.
But the overriding issue is whether restructuring and retail competition will benefit consumers as advertised.
The deregulation lobby has argued successfully in Maryland, Virginia and at least 20 other states that competition in a deregulated industry will pave the way for suppliers of electric power to sell electricity much cheaper at the retail level.
Proponents of sweeping changes to a system in which electric utilities are regulated monopolies also claim it would be beneficial for consumers to be able to choose their electric supplier in a deregulated environment.
For their part, Pepco officials say a small utility such as theirs would not be able to match the low prices that bigger competitors could offer. Thus, Pepco plans to auction off its generating plants, purchase power from other sources and resell that power to its customers.
If Pepco is prepared to take that route, then so be it. It's a corporate risk that management and shareholders obviously are prepared to share, assuming the PSC approves Pepco's divestiture plan.
That's not to say, however, that consumers will be the principal beneficiaries of divestiture and retail competition.
The idea that competition will result in lower rates for consumers is pure propaganda designed to sway federal, state and local officials. Rates paid by consumers in the District already are among the lowest in the country.
If cheaper rates for consumers is not the end result of retail competition, then what's the point of doing away with the current system?
Why would Pepco customers in the District want to give up safe, reliable service, at relatively low rates in a regulated environment, for some pie-in-the-sky pitch under the guise of consumerism?
It would be a different story, of course, if the District were among those states where electricity rates are considerably higher than the national average.
Although some states have capped those rates for a fixed number of years initially, it's possible that the cost to consumers will increase later.
The only users that are likely to benefit from restructuring are big industrial customers and government agencies. Not surprisingly the big push for deregulation is being led in part by several major industrial corporations.
Still the question remains: How much competition will there really be if deregulation leads to a flurry of mergers and acquisitions and, ultimately, an industry in which a few giants dominate?
Pepco emphasizes that the delivery part of the business will continue to be regulated and that it will continue to deliver power and maintain transmission lines.
But Pepco has other issues that must be resolved. The PSC will decide by the end of the year whether it's in the public interest for Pepco to sell its Buzzard Point and Benning Road generating plants in the District.
"We are analyzing whether it may be more cost-effective to require Pepco to retain these plants or to sell [them] in the private market," Ed Meyers, acting chairman of the PSC, said in testimony this week before a committee of the D.C. Council. Meyers added that the PSC is also investigating whether it can set conditions on the sale of the plants, a step designed to ensure operational reliability.
Legislation pending in the council, meanwhile, would require Pepco to give the D.C. government the right of first refusal to the plants, a strategy that would allow the city to turn them over to a contractor, thus ensuring continuity and reliability.
Indeed, the PJM power pool in which Pepco shares--that's PJM as in Pennsylvania, New Jersey and Maryland--has advised the PSC that the two D.C. plants and one in Alexandria will be designated "must run" facilities for the District by the year 2006, according to Meyers. In short, the plants must be operating during peak periods in order to avoid power outages.
Pepco nevertheless insists that selling its generating facilities is the "right thing to do for customers and employees."
Let's be clear about one thing. Pepco wants to diversify into other business segments, including telecommunications and cable.
Divestiture, as a cost-cutting measure and a way to raise cash for other business ventures, may be the right thing for management, employees and shareholders of the company. But is it really the right thing for consumers?