In the early days of the electric industry,
a single electric utility had a monopoly on
its service area controlling all aspects of electricity generation,
transmission and distribution, and being
the sole provider of electricity to customers in the service area.
This model no longer exists in the US as a result
of a series of major federal policies implemented by
the US Congress and enforced first by the Federal Power Commission
and then by its predecessor the Federal Energy Regulatory Commission or FERC.
The history of these policies or acts can be subdivided into two periods.
The first period was largely directed at managing the natural monopoly aspect to
the electric industry so as to ensure
reasonable and stable electricity rates to customers,
increase the availability of electricity throughout the country,
ensure industry safety, and minimize environmental impacts of electricity generation.
Major policies that were enacted during this period which extended from
the 1920s into the 1970s include: The Federal Water Power Act of
1920 which encouraged the development of hydro electric power plants and established
the Federal Power Commission or FPC as
the federal regulatory agency for the electric industry.
The Public Utility Holding Act of 1935 also known as
PUHCA regulated the size and geographic range of utilities and required
public utility holding companies to register with the Security Exchange Commission
whose oversight helped eliminate the monopolistic practices of these holding companies.
The Federal Power Act of 1935 expanded The Federal Water Power Act to
give the FPC jurisdiction over all interstate electricity transmission.
The Rural Electrification act of 1936 provided loans to
co-operative electric companies to install
distribution systems in rural areas and gave rise to co-ops.
The Atomic Energy Act of 1946 established the Atomic Energy Agency later to become
the Nuclear Regulatory Commission and gave
the NRC regulatory oversight of nuclear power plants and their access to transmission.
The Department of Energy Organization Act created the Department of Energy,
changed the Federal Power Commission to FERC and moved FERC under the DOE.
And starting in 1955,
a series of environmental protection acts were
implemented including the National Air Pollution Act,
the Clean Air and Clean Water Act,
and the National Environmental Policy Act which helped spur
the creation of the US Environmental Protection Agency.
The second period of federal policy
emphasizes restructuring of the electric industry to increase
competition in the generation and retail sides of
the industry and thus minimize electricity costs.
This period also includes amendments to
the Clean Air and Clean Water Act that were designed to
further reduce the impact of electricity generation on the environment.
The period, which extends through today in 2015,
begins in 1978 with the Public Utilities Regulatory Policy Act or PURPA.
This Act ended utilities' monopolization
of generation by giving FERC the authority to require
utilities to provide transmission access to
small scale third party generators known as independent power producers.
The next major policy Act during this period was the Energy Policy Act of 1992
which removed restrictions on what qualifies as an independent power producer.
And the third major regulation during this period was FERC order
888 which effectively broke the last hold that integrated utilities had
on controlling access to electricity customers by requiring
all transmission under FERC jurisdiction to provide wholesale transmission services.
In doing this, FERC order 888 separated the generation and
retail ends of the industry from
the transmission and distribution parts of the industries.
Utilities were allowed to keep ownership of transmission and distribution but access
and prices to these lines now became regulated by FERC if they cross state boundaries.
Furthermore, the wholesale generation and
retail sides of the industry were opened up to competition.
Existing utilities could keep their generation assets but these now
had to compete with other generators to provide electricity in the wholesale market.
The restructuring regulations did indeed increase competition in
the electric industry giving rise to electric marketers and optimization of
the generation transmission and distribution assets of multiple utilities and
independent power producers by
Independent System Operators and larger multi-state regional transmission organizations.
However, errors in the implementation of restructuring,
some that could have been avoided and others that were unforeseen,
led to the 2000/2001 California Energy Crisis
in which the state suffered an electricity shortage that was compounded by
market responses and manipulations that bankrupted
one of California's three electric utilities and almost bankrupted another.
California's damaging experience led other states to slow,
stall or even reverse their own restructuring efforts.
As a result, electricity markets in the US still vary from state to state and have
structures that span from
the traditional regulated market to fully restructured and competitive markets.