Market forces and planning by regulation: Conflicts and complementarities

The US electric utility industry is being shaped by two seemingly competing policy directives. Federal policy has embraced a movement towards greater reliance on market forces (selective deregulation) as a means to shape electric utility industry growth and development. Indeed, many utilities would like to be free of regulatory control and to be able to price their services on the basis of what the market will bear. Simultaneously, regulatory policy in many states has placed greater reliance on planning: particularly with the use of advance plans, least-cost plans, or integrated resource plans. The purpose of this paper is to consider the movement towards deregulation and the need for planning in the electric utility industry. The various policy initiatives that would be necessary to protect planning and promote effective competition are discussed.