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Economic Perspectives, 26, No. 1, February 2002
The electricity system at the crossroads — Policy choices and pitfalls
In the mid-1980s, electricity policy in the United States began a new chapter when wholesale electricity markets were opened to competition. While the immediate goal was to increase the diversity of supply for electricity generation, proponents of restructuring also cited success in restructuring other network industries such as telecommunications, airlines, and natural gas as justification for introducing competition to the electric utility industry. Wholesale competition for producing electricity would improve generation efficiency, diversify supply, promote innovation, and even lower prices. Success in opening the wholesale market, proponents argued, would eventually be extended to the retail market, and all consumers would have the opportunity to choose their supplier and pick an electricity service that best fit their individual needs.
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