By Marjorie Kelly and Richard Rosen ¦ April 8, 2007, Boston Globe

IT'S TIME to break the silence in Massachusetts about the failure of electricity deregulation, which is the hidden cause behind soaring electric rates today.

Here in Boston customers today pay astronomical prices of nearly 20 cents per kilowatt hour -- 70 percent more than in recent years. According to a recent study by our organization, the Tellus Institute, Massachusetts residents in 2006 paid the second highest electricity rates in the nation. Among the dozen or so states that have deregulated electricity, we paid the highest rates of all.

In general, deregulated states paid 55 percent more for electricity than states that remained regulated, our organization found. And the difference has been increasing.

Rising rates are a signal of the failure of deregulation, which in many states has led to public debate and action. In New Jersey, Delaware, and elsewhere, legislatures stepped in to block price spikes of up to 60 percent or more with price caps. Eight states are considering re regulating, including Montana, where the Legislature faces 100 bills on the topic. And four states argued in federal appeals court last month that deregulatory actions by the Federal Energy Regulatory Commission were illegal.

In Connecticut, Attorney General Richard Blumenthal has proposed a windfall profit refund, to return ratepayers up to $1 billion in excessive profits made by generators. In prepared remarks for a February Take Back the Power conference in Washington, D.C. -- possibly marking the start of a national movement challenging electricity deregulation -- Blumenthal said, "The first step in addressing any problem is acknowledging you have a problem."

Massachusetts has not publicly reached that point. The state faces an eerie silence on electricity deregulation. Consumer groups are not actively campaigning to undo it, and state authorities have not publicly opposed it. (Full disclosure: Our organization does consulting work for state public utility commissions and consumer groups.) Since electricity rates did not spike but rose more gradually over time, Massachusetts consumers, like the proverbial frog in the pot, seem not to notice the water's boiling.

This month the state has a unique opportunity to break the silence and take action. As part of a recent governmental reorganization, Governor Deval Patrick has moved the Department of Public Utilities into a newly created Executive Office of Energy and Environmental Affairs, which has given him the opportunity to replace that part of the public utility commission that regulates electricity.

The new commissioners should begin their work by acknowledging the significant problems caused by electricity deregulation and taking steps to correct them. At a minimum, they should take three steps. First, they should work to reclaim consumer-friendly regulation, bringing back rules that set electricity prices in relation to the cost of providing service. Second, Massachusetts should reinstate least-cost planning, in which different methods of generating electricity can be evaluated by their expense, in terms of both dollars and environmental damage. Third, the state must reduce demand for fossil fuels through aggressive conservation and increased investment in renewables.

The experiment in deregulation has failed nationwide because it is difficult, perhaps impossible, to have a competitive market in electricity. There are insurmountable problems intrinsic to the technology involved: supply and demand must match instantaneously, and there are limits to how much the transmission grid can carry at once. And electricity is not simply a commodity, since consumers have no ability to decline to purchase when prices are too high.

Because electric power is a necessity of modern life, power providers need to be accountable to consumers through democratic governance. Before deregulation, state utility commissions provided that accountability. They must do so again.

© Copyright 2007 Globe Newspaper Company