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Deregulation will cause significant fluctuations in electricity prices, new study reveals

ted deregulation plans.

Transmission capacity

Having sufficient transmission capacity between regions is critical, say the authors of the EMF study. On a national level, expanding the transmission capacity or reducing transmission fees will influence average U.S. wholesale electricity prices by less than 2 percent over the next decade, according to the study. But regional prices could be 12 to 13 percent higher or lower depending on the capacity and cost of transmission. In general, the study concludes that importing regions now paying higher prices will experience relative rate reductions if they obtain more transmission access, while low-cost exporting regions will experience higher prices.

``These rate adjustments reflect the search for the right balance between supply and demand conditions in the various parts of the United States,`` observes Huntington. ``Regions like the Pacific Northwest may not like to see their prices rise, but their export sales will benefit their own economies as well as those in higher-cost states like California.``

Environmental impact

The study also addresses the impact that restructured electricity markets will have on the environment - particularly on the amount of carbon dioxide emissions, considered a leading cause of global warming.

According to the study, if electricity generation goes up by 1.6 percent a year during the next decade as expected, carbon dioxide emissions from U.S. power plants will increase by a slower annual rate of 0.9 to 1.3 percent. This trend reflects a strong shift toward natural gas as a fuel source, according to EMF. The study predicts that new gas-fired plants will account for more than 80 percent of the additional electricity generated over the next 10 years. Slower retirement of nuclear power plants also will contribute to the slower growth in carbon dioxide emissions.

Emissions of nitrogen oxide pollutants from power plants will tend to remain relatively stable over the next
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Contact: Mark Shwartz
mshwartz@stanford.edu
650-723-9296
Stanford University
13-May-2001


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