Deregulation and Competition in the Electric Power Industry Subject of FTC Testimony before House Subcommittee

Commissioner Mozelle W. Thompson testified today on behalf of the Federal Trade Commission before a House Subcommittee on deregulation and competition in the electric power industry. Thompson spoke to the need for strong merger enforcement in the industry so that restructuring does not result in the abuse of private market power. "The Commission stands ready to use its authority and expertise to ensure that consumers receive the substantial benefits that energy deregulation will bring to the market," Thompson said.

In his appearance before the House Committee on Commerce's Subcommittee on Energy and Power, Thompson outlined the agency's experience with applying antitrust principles across many different industries. The testimony points out that competition provides consumers with the lowest prices, best products, and most innovation possible. As a century of regulation gives way to competition "the benefits of regulation may be greatly affected by the ability of the energy market to move to an open and competitive stance," the Commissioner said. It noted however, that "these benefits will not be achieved without appropriate action to alleviate market power impacts."

Thompson spoke to the regulatory background in the electric power industry and pointed out the transition problem that policy makers face because the industry, comprised of local monopolies, is not the level playing field of a newly developing market. Antitrust laws will help in the transition to competition, Thompson said, "by making sure that mergers do not aggravate market power problems or protect incumbents from new competition." In addition, unfair acts and practices such as "predation, raising rivals' costs, and discriminatory access to essential facilities" can be prevented by the antitrust laws, he stated.

The Commission's testimony points out that economic theory and experience shows that the transition from regulated monopolies to competition is not an automatic process - "doing it right requires actively promoting competition and guarding against practices that stifle competition."

Thompson testified to the Commission's opinion that the antitrust laws will have to be applied flexibly to handle these issues. "The impact of ... regulation on the industry structure, incentives, and expectations requires that the antitrust agencies be especially sensitive in applying antitrust rules while market forces regain primacy," the testimony states. Thompson noted, however, that "special care" does not means a "hands off" approach. "The goal is to see regulation replaced with competition, not with collusion or dominant firm behavior," he said.

The testimony notes that the staff of the Commission has commented to the Federal Energy Regulatory Commission and to a number of states on the importance of market power considerations while introducing competition in the electric power industry at the retail level.

The Commission also will hold a public workshop on September 13 and 14 to further examine market power and consumer protection issues in the electric power industry.

The Commission vote to authorize the testimony was 4-0.

Copies of the testimony, as well as Commission staff statements on deregulation and competition in the electric power industry, 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; 202-FTC-HELP (202-382-4357); 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.

(FTC File No. 950101)