Electrical utility deregulation is the process of transforming electrical utility companies from regulated monopolies to market-driven suppliers of competitive energy and services. (Reliant Energy HL&P 1999) It means that customers will have the ability to choose their electrical supplier. Today's utility customers want lower prices, more choice, and better service as well as reliability. The deregulation of other industries such as railroad, trucking, natural gas, and telecommunications has shown people that choice can provide better value. The deregulated electric utility industry would look and act a lot like the long distance phone business. The market would set electricity rates. Sharp increases or decreases in the cost of fuel or customer volume would affect the prices. Prices have decreased even without deregulation however. According to the Edison Electrical Institute, real electricity prices have dropped 27 percent in the last 15 years. But with deregulation there is .
the potential that they will drop even more. The main issue that is of concern to electrical utility companies is stranded costs. Stranded costs are the past investments utilities were obligated to make in the regulated electric system. These investments were prudently incurred and government-approved to ensure reliability of supply and were partially recovered through customers" rates. (Reliant Energy HL&P 1999) Electrical utilities believe the recovery of past investments should be part of the overall deregulation process since they will be hard to recover in an open, competitive marketplace. If this issue is resolved to the satisfaction of the utility companies, it will open the way for deregulation. As stated in the previous page, the main obstacle to electrical utility deregulation is stranded costs. Two of the main issues surrounding stranded costs are their impact on electricity prices and stranded costs will affect the financial viability of an individual electrical utility.
