The effectiveness of regulation in the electrical energy industry

There is a gap between what federal and state regulatory commissions are authorized to do and what they are doing to regulate the electrical energy industry. It has been argued that a pricing scheme in the industry has evolved akin to the pricing scheme a discriminating monopolist might employ for different classes of consumers that are spatially diffuse. The attention of the paper is focused on the effectiveness of regulation in the industry, given the characteristics of it. The method of analysis chosen is to construct two models which are polar opposites and compare the results with what was actually the situation in 1973. The conclusion indicates that it is justifiable to argue that the electrical energy industry on the whole is not allowed to behave as a spatial monopolist. It is not correct to conclude that monopolistic tendencies are absent. Specifically, the pricing structure does depart from the competitive criterion which requires price to equal marginal cost for each consumer sector and all regions. Further, little electrical energy is transmitted interregionally.