The Effects of Regulation on the Electric Utility Industry

Over the past decade, electric utility companies have been subjected to an increasing number of regulatory requirements by federal and state agencies. Compliance with these requirements has been and continues to be costly. There has been a growing concern that regulations are putting too great a burden on the economy. GAO reviewed the regulatory process as it has been applied to electric utility operations.

The review led to the following overall observations: (1) electric power projects and operations have been more costly as a result of changing regulatory requirements and delays and uncertainties associated with the regulatory process; (2) the utility companies' ability to provide adequate supplies of power to their service areas has not been adversely affected; (3) tangible benefits to ratepayers have not always been visible, although some social benefits may have been realized; (4) regulators often did not know how to best achieve their objectives or assess the results of a requirement; (5) it is imperative that government provide a balanced approach in regulating the industry so that the cost and reliability of future power services are considered along with the environmental, health, and safety concerns of the public; and (6) the Carter administration and Congress appeared to be much more concerned with the economic effects of regulatory actions and with evaluating the costs and benefits of achieving a desired goal. However, few of these efforts are directed towards alleviating the more routine regulatory problems, and the problems will continue unless cognizant regulatory agencies recognize them and become more aggressive in redirecting their regulatory emphasis and incorporating greater precision in their efforts.