The Electric Generation Service Supply "Opt-In, Opt-Out" Decision: Determining What's Best for Member-Consumers (2001)

In the 1930s and 1940s, many Americans did not have the ability to receive electric delivery or distribution service since it was not available from investor or municipally owned electric utilities at affordable prices, if at all. Cooperatives were formed by resourceful members who both provided their own money--through membership contributions and patronage capital--and who also obtained government loans to build their own electric systems. Later--primarily in the 1960s--another major challenge came for electric cooperatives when it become apparent that cooperatives and their members could not count on reasonably priced electric production or generation services from investor or municipally owned utilities. This led to the formation of many generation and long distance transmission cooperatives (GT that is, permitting electric end-use customers to choose their electric production or generation supplier. It also involves possible in the selection of a provider of certain other electric services. Deregulation and Its Implications In the United States, there are 23 states where restructuring legislation has been enacted and one state where comprehensive restructuring orders have been issued. These actions will require many electric utilities to offer generation service to their electric customers. There are also 21 more states that have active legislative and/or regulatory processes underway to study restructuring and propose implementing legislation. The view that drives these initiatives is that by removing barriers to competition, energy prices will be reduced, the quality of energy services will improve, and the quantity of energy service offerings will be increased. And there is evidence in other industries that deregulation does, in fact, lead to these results (Table 1). Besides price reductions, deregulation has led to the quantity of services being increased. For example, in the telecommunications industry, the competitive demands of the marketplace and technology advances have led to a proliferation of phone technology, which has resulted in more telecommunication services to customers such as call waiting, caller I.D., and better phone messaging services. Many believe the quality of services has also been maintained. One author explained, Crucial social goals such as airline safety, reliability of gas service, and reliability of the telecommunications network were maintained or improved by deregulation and choice (Thierer, 1997). Under current law, federal regulators do not have the authority to order retail choice. Deregulation rules and requirements, therefore, will be approved on a state-by-state basis. Given this, some cooperatives will be forced to offer their members choice. Other cooperatives will not be permitted to offer their members choice. Other states, however, are going to offer cooperatives the option to participate in a particular state's environment or not. This decision is commonly referred to as a customer opt-in or opt-out decision. Given the results of the deregulation of other industries and the assumed potential benefits associated with in the utility industry, each individual electric cooperative facing an optin, opt-out decision must be prepared to determine whether there are benefits of for its member - consumers. If the benefits of are not apparent, cooperative leaders must be able to knowledgeably explain to member-consumers why these tangible benefits are not available for the members of the cooperative at the current time. …