Electricity Restructuring: Key Challenges Remain Page: 4 of 26
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A
GAO
Accountability * Integrity * Reliability
United States Government Accountability Office
Washington, D.C. 20548
November 15, 2005
The Honorable Darrell E. Issa
Chairman
Subcommittee on Energy and Resources
Committee on Government Reform
House of Representatives
Dear Mr. Chairman:
Since 1992, the electricity industry has been in the midst of many changes,
collectively referred to as restructuring. Before restructuring, electric
service was provided primarily by federally and state-regulated electric
utilities. A utility typically owned the power plants, transmission system,
and local distribution lines that supplied electricity to all of the consumers
in a geographic area. Under this system, the Federal Energy Regulatory
Commission (FERC) regulated, among other things, sales of electricity for
resale and the transmission of electricity over high-voltage power lines in
interstate commerce.1 The states regulated retail markets by participating
with utilities in forecasting growth in demand, planning and building new
power plants, reviewing and approving utility costs, and establishing rates
of return. Since restructuring began, there has been a shift from a highly
regulated environment to one that places greater reliance on competition.
This restructuring effort is occurring against a backdrop of constraints and
challenges. First, it is occurring within a context of numerous federal and
state laws and regulations that address clean air and water, fish and wildlife
management, and irrigation and flood control. Second, responsibility for
implementing and enforcing these laws and regulations is distributed
across a wide range of federal, state, and local agencies. Third, electricity
demanded by consumers is expected to rise 36 percent by 2025, requiring
significant investment in new power plants and transmission lines.
Furthermore, several recent events, including the largest blackout in U.S.
history along the East Coast in 2003, the energy crisis in California and
other parts of the West in 2000 and 2001, and rolling blackouts as recently
as August 25, 2005, in southern California, have drawn attention to the need
to examine the operation and direction of the industry.
1FERC does not regulate most of Texas' electricity system because it is an independent
transmission region that does not engage in interstate commerce.GAO-06-237 Electricity Restructuring
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United States. Government Accountability Office. Electricity Restructuring: Key Challenges Remain, report, November 15, 2005; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc302581/m1/4/: accessed April 24, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.