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Government-directed competition in the wholesale power industry will lead to lower prices and better service, Elizabeth A. Moler, chair of the Federal Energy Regulatory Commission, (FERC) said last night in a speech before 150 at the Kennedy School last night.
Moler said the industry has undergone major changes over the last 15 years, and that the government is now pursuing a more activist role in fostering competition.
With the Public Utility Regulation Policy Act of 1978, utilities were required to buy power from independent power industry providers.
And recently, Congress has granted the FERC specific powers, such as enforcing the so-called "open access principle," which requires utilities to transport power for others.
The government's "aggressive" implementation of its new powers has led to the entry of new competitors, attracted by the cheap prices of the power supplied by independent providers, Moler said.
"Utilities have typically had a stranglehold so they could thwart their competitors from getting to market and in the wake of [recent orders] that stranglehold is gone," Moler said.
The FERC has issued a conservative estimate of $3.8 to $5.4 billion in annual consumer savings under a competitive wholesale electricity market.
"In the electric business, there's a whole lot of money on the table," said Moler. "If we can make this industry work more efficiently and still be a reliable industry,...the bottom line will be a more efficient industry which can serve us better at a lower cost."
Although deregulation of the electric power market has made some large utility firms nervous, Moler said theirs may be a case of live and let die.
Utilities are trying to position themselves through mergers," Moler said.
"In this transition, some utilities may not make it," she said.
Moler was appointed chair of the FERC by President Clinton, although she served in the commission under presidents Ronald W. Reagan and George H.W. Bush.
The event was co-sponsored by the Harvard Electricity Policy Group, headed by the Kennedy School's William Hogan, Bradshaw professor of public policy and management.
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