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In recent memory, PURPA opened up competition in the generation market with the creation of qualifying facilities, and more recently, EPACT went further still by removing some constraints on ownership of electric generation facilities and encouraged increasing competition in the wholesale electric power business. However, of late, and in the absence of further nationwide legislation, it seems that regulation, restructuring, the importance of regulatory activity and our understanding of these is leeching from our collective consciousness.

Often in discussion with colleagues and clients about the state of regulation and the market, we recite a litany of reason and facts about why deregulation in the United States has been paced. The top of this list is reticence. Regulators, utilities, and utility consumers share in a culture of committed ambivalence when it comes to utility services. As a foundational premise, consumers expect that services—water, electricity and gas—be available to them, on their demand and utilities expect to be the provider of choice. In most cases, however, expectations for industry and consumer don't go much further except in the economic equation where consumers and regulators demand “competitive” prices, and utilities focus on making a “competitive” profit, a concept tacitly supported by, if not bolstered by, a regulatory regime whose administrative ethos swings in a bi-polar like fashion between paternalistic guardianship of the consumer wallet and protection of the virtual utility infrastructure monopoly.

This author was joggled awake from such routine thinking about industry regulation and restructuring, after reading an open letter written by an august group including nine ex-federal energy regulators that, in essence, protests what they describe as a needless and seemingly gratuitous assail on open, competitive power markets. The letter outlines the benefits of competition in wholesale electricity markets and crescendos around the notion that the advantages of continued deregulation accrue favorably in the future. While I agree with the premise of virtue through competition in electric, gas, and water wholesale and retail markets, what most struck me, and should strike us all, about the epistle is its zeal, and by extension its discernable if not clarion call for continued if not redoubled focus on the organizational, legal, and commercial structures that drive the marketplace.

Legislation, such as previously mentioned PURPA and EPACT and impassioned political letters, isn't the only occurrence that should draw industry attention to market structure and market oversight. All of the consultants and analysts at UtiliPoint have lately spent substantial time reviewing and analyzing the recent spate of industry acquisitions by private equity firms. Among the most notable and recent history making deals, the Kohlberg Kravis Roberts & Co. (KKR) and TPG's leveraged buyout of TXU Corporation has been particularly beguiling. Though KKR and TPG have been rather quiet about their vision and strategic plans for TXU Corp., rumor has it that a “national utility” might be in the works.

If such a national utility is indeed the plan, regulators and the industry are woefully unprepared to put forward a framework to steward such an organization and fulfill the regulatory mandate to protect customers at a nationwide scale. What better reason do we, as an industry, need to take further action on deregulation and the market restructuring of the prospect of a national utility organization?

Deregulation and market restructuring have, to date, proven itself to be of value. Competitive retail has not only been a force for change, but a force for challenge that is driving innovation and invention. Retail competition in the electric and gas markets is ipso facto the acknowledged driver behind wide-scale utility attention to customers, customer service, and improvement of service delivery. Margin pressure created by deregulation has driven both integrated monopoly utilities and competitive service providers to think not just about efficient operations, but to make decisions, sometimes tough ones, about running effective businesses with acumen from finance, to technology, to people, etc.

Further, deregulation has made for a fascinating bevy of new business models and dynamic corporate thinking. Competitive utility retail businesses are both the culmination of the promise of high-technology and new opportunity. The industry's best and brightest have flocked to successful competitive utility organizations, and though delayed in gratification—as the Internet boom is well over—personal growth, professional success, and positive sector development are coming in now in an ever-fuller measure.

Detractors of deregulation are not wholly unwise to be skeptical. Business school libraries and media archives are replete with stories of woe and tales of consumer abuse. One need not to look far back in business annals to Enron, WorldCom or Tyco, to see where beating expectations at the bottom line and brimming profit coffers were filled by unethical decision making and worse yet, criminal intent.

Though a strong public letter and a utility buy out by private equity have certainly stirred my thoughts and piqued my curiosity, it also sparked in me, as an analyst, a deeper sense of wonder about what is next in the realm of deregulation. Years ago, at a conference, I speculated that the government, under the administration of the first President Bush, would drive deregulation and restructuring in the utility industry much in the same way previous administrations had driven banking, insurance, and airline deregulation. I was certainly wrong about the timing of national deregulation or its scope, but perhaps I made an even more fundamental error; maybe it won't be government at all that tips the balance in favor of a more complete national deregulation. The competitive market itself, and the companies that compete within it, may drive the final wedge to fell the tree.