FTC Staff Issues Report on Restructuring in Electric Power Industry

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The Federal Trade Commission today issued a staff report addressing many competition and consumer protection issues that arise in restructuring the electric power industry. The report, "Competition and Consumer Protection Perspectives on Electric Power Regulatory Reform," stems from the Commission's unique role of studying competition and working with the business community to detect new market trends, and suggests an analytical framework that federal and state policymakers may wish to employ to ensure that consumers and businesses benefit from electric power industry restructuring.

The report highlights how electric power restructuring is enabling customers to select their own electric power supplier. This restructuring raises many competition and consumer protection issues focusing on how to obtain lower prices, cost efficiencies, and innovations of a competitive market without creating new inefficiencies or penalizing incumbent utilities. The report cautions that "the benefits of deregulating the electric power industry may be deferred -- or may not materialize at all -- if existing monopoly utilities are left unchecked to exercise market power in a deregulated marketplace."

The report discusses the FTC's previously articulated four principles for effective restructuring of electric power markets to ensure that the benefits of competition flow to consumers. Briefly, these principles include: (1) unburdening markets from substantial and durable horizontal market power; (2) removing incentives for vertically integrated firms to engage in undue discrimination and cross-subsidization; (3) fostering accurate, non-deceptive information disclosure to customers about price and service offerings; and (4) promoting uniform disclosure of the prices and other relevant attributes of offers to customers.

The report concludes that consumers in electric power markets are likely to be better able to promote their interests when they can readily switch among several suppliers offering a variety of products and services and when they can easily compare prices and terms of competing offers. Vigilant enforcement against unfair and deceptive business practices, which may occur in a newly deregulated electric power market, is critical to ensure consumers obtain the benefits of competition.

The Commission vote to issue the staff report was 5-0.

Copies of the report, "Competition and Consumer Protection Perspectives on Electric Power Regulatory Reform," are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; toll-free: 877-FTC-HELP (877-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

Howard Shapiro

Office of Public Affairs

202-326-2176

Michael S. Wroblewski

Office of Policy Planning

202-326-2155

(FTC File No. V000009)

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