Open Entry, Choice, and the Risks of Short-Circuiting the Competitive Process
1 March 2000
By Dr. Kenneth Gordon, et al.
Electric restructuring, properly viewed, provides open entry into competitive markets and allows consumers to choose for themselves their provider of retail generation services. The combination of open entry for suppliers and choice for customers aims at providing the benefits of competitive markets (e.g., efficient resource allocation, accurate price signals, incentives for innovation, etc.) while also avoiding many of the negative attributes of the former regulated generation system (e.g., weaker efficiency incentives, regulatory costs associated with least-cost, integrated resource planning and traditional rate-of-return ratemaking, etc.). Attempts to "jump-start" or "manage" the formation of specific retail markets by the administrative development of groups of customers is the antithesis of this market driven process. While such steps are usually justified as necessary to move more quickly to competitive markets, such a strategy is fundamentally inconsistent with providing open entry and consumer choice, and allowing the industry to develop on an economically and efficient basis.
