Energy and environmental efficiency in competitive power markets

For years the electric utility industry operated as a regulated monopoly, largely immune to market forces except those of competing fuels. That era came to an end with the Public Utilities Regulatory Policy Act (PURPA) of 1974, which created a market for non-utility generated power. Within twenty years, non-regulated, non-utility generators had become the primary supplier of new energy resources. Their market power is matched by their political power, as evidenced in the Energy Policy Act of 1994 (EPAct), which requires open access to utility transmission lines to facilitate inter-utility bulk power sales. The conventional wisdom is that active wholesale power markets with competition among alternative generators will lead to lower power-development costs and cheaper retail power prices. The trend towards alternative bulk power sources at low prices intersects with large retail power customers` interest in accessing alternative power supplies. In most cases, these alternatives to local utilities are at a lower cost than retail rates. For the most part, proponents of generation competition have remained silent about potential environmental consequences. However, skeptics of increased competition, including major environmental groups, cite environmental impacts among their concerns. This report examines these concerns.