AN ASSESSMENT OF
RETAIL COMPETITION IN KANSAS' ELECTRIC POWER INDUSTRY
 
 
 
 
 
 
by
Kenneth Costello
Associate Director for Electric and Gas Research
and
Kenneth Rose
Senior Institute Economist
with assistance from
John Hoag
Graduate Research Associate
for
THE KANSAS CORPORATION COMMISSION
 
 
 
 
 
 
THE NATIONAL REGULATORY RESEARCH INSTITUTE
The Ohio State University
1080 Carmack Road
Columbus, Ohio 43210-1002
Phone: 614/292-9404
Fax: 614/292-7196
Website: www.nrri.ohio-state.edu
 
 
September 1997
 
 
This material was prepared with the support of the U.S. Department of Energy (DOE) Grant No. DE-FG47-92CE60210. The views, opinions, findings, conclusions, or recommendations expressed herein do not necessarily state or reflect the views, opinions, or policies of the NRRI, the Kansas Corporation Commission, or the DOE.
 
 
 
 
 
 
EXECUTIVE SUMMARY
 
 
Electric power industry restructuring has become a world-wide phenomenon. Whether because of the increasing perception that governmental intervention has caused serious economic distortions or because of technological advances, reforms in the electric power industry have proliferated in recent years. These reforms reflect the political acceptance throughout the world of the merits of markets in driving the behavior of industry participants.

In the United States, restructuring activities have grown by leaps and bounds. Significant is the recent passage of legislation in Montana and Oklahoma, each of which from a national perspective has below-average electricity prices. Prior to these events, one common belief was that restructuring efforts were concentrated in only those areas with high electricity prices such as California and the Northeast. This view now has little credibility as restructuring sweeps across the country.

Reform proposals in the U.S. electric power industry have primarily, and not surprisingly, come from special interests who stand to benefit the most from a more open electricity marketplace. Another source revolves around the public-interest-type concern that regulation of utility monopolists has not benefited consumers. Regulation was established under the premise that it would keep electricity prices below what they otherwise would be. Although, throughout much of its history regulation arguably achieved this, it has failed to do so in recent years. Technological advances in the electric power industry have now made it possible and desirable to expose at least parts of the industry to competition. Restructuring activities reveal, perhaps more than anything, the growing political and economic costs of the status quo where utilities hold wide-ranging monopoly power controlled by regulatory statutes and rules.

Kansas has joined the circle of states currently contemplating what path to follow for their electric power industries. Their policy on industry restructuring hinges largely on their position on retail competition, which is synonymous with the concepts "retail wheeling" and "customer choice." These terms all refer to allowing retail electricity consumers, namely residential, commercial and industrial customers, to have the right to purchase unbundled electric services from other than the local franchise