Feel free to answer the questions posed in part (a) in point form.
Deregulation is the process of reducing or removing state regulations (or in some cases
ownership and control) of some industrial sectors. In the 1980s and continuing into the
1990s concerns were expressed that government regulation rather than solving a market
failure was contributing to inefficiencies and that there was a risk that regulatory agencies
could be “captured” by the regulated industry for its own benefit. This would hurt
consumers specifically and the economy in general.
The bottom line is that deregulation was seen as the best way to ensure that prices were
kept low (through the market discipline that competition brings) and that consumers had a
choice (and we all know that choice is important in economics).
Until this point the North American electricity sector was characterized by regulated,
vertically integrated utilities. Today 20 or so American utility markets and two Canadian
ones (Alberta and Ontario) have been deregulated. That is ownership of generation and
transmission facilities are now owned by different entities and, generally speaking, the
utility still looks after distribution, billing and is the provider of last resort. As an interesting
aside, the current Alberta Government is musing about re-regulating the electricity sector.
This assignment is in two parts. Part (a) Given about two decades of experience and
evidence has deregulation delivered on the promised economic benefits of keeping
electricity prices low and providing consumer choice? Where has it worked well and where
has it gone a little less well1? Why?
Take what you learned in part (a) and apply it to part (b). Ever since the 1980s there has
been a discussion around the privatizing of SaskPower (see the SOS Crowns campaign).
Leaving aside the normative discussion surrounding Saskatchewan Crown Corporations and
just looking at the economic evidence do you think that electricity consumers in
Saskatchewan would benefit if the electricity market was privatized? Explain (briefly) why or
why not.
Note:1 I don’t expect, nor want, an exhaustive list. Representative examples, enough to show you did some research and
analysis, will suffice.