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Press Release |
Contact: 202/462-6262 |
WASHINGTON – Higher electric bills could be around the bend under electric industry restructuring if proposals being advanced by the Clinton Administration and lawmakers on Capitol Hill become law, according to a new study unveiled Wednesday by two leading consumer organizations.
"For consumers, many of the initial claims of price cuts and improved service have been grossly misleading," says Adrienne Mitchem, Legislative Counsel at Consumers Union (CU), which released the study jointly with the Consumer Federation of America (CFA). "These early claims were optimistic scenarios that have little chance of coming to pass. It is quite clear that residential ratepayers will only benefit from restructuring if vigorous policies that protect their pocketbooks are implemented."
"The Residential Ratepayer Economics of Electric Utility Restructuring," authored by CFA Research Director Mark Cooper, uncovers the fundamental flaws in the electric deregulation proponents’ predictions that consumers will reap billions in savings. Industrial users, with the backing of Citizens for a Sound Economy, have predicted residential ratepayers could save 43 percent on their electric bills with deregulation in place. Last October, President Clinton said deregulation would "save America billions of dollars."
However, these predictions of windfall savings for residential ratepayers fail to withstand close scrutiny, according to the consumer groups. Under deregulation, four factors are likely to push consumers’ electric bills beyond competitive levels: new operating costs, price discrimination with discounts for big customers but markups for residential households, monopolistic practices resulting from market power and stranded cost recovery that inflates consumers’ bills.
Unleashed market power that is not disciplined by regulation or competition is bad for consumers, the groups conclude. According to CU and CFA, the experience of other large industries that have undergone deregulation should sound a loud warning signal. In the case of the telecommunications and the cable television industries, deregulation has brought little competition and higher prices for consumers. In the case of airlines, inadequate antitrust and competitive oversight yields a mixed result for consumers.
NOTE: Please call our faxback line at 202/238-9258 for more information including a 7 page chart pack presenting the studies findings (doc no. 3401) and a one page summary of proposals to minimize the cost of electric deregulation for consumers (doc. no. 3402 )
