October 22, 1997

As part of his climate change initiative, President Clinton announced his support for appropriately crafted electricity restructuring legislation that will save consumers billions of dollars while reducing carbon emissions.


The electricity sector is our nation's most capital intensive industry -- and has sales of over $200 billion. Under electricity restructuring, competition would be the primary mechanism to set electricity generation prices. Utilities would open up their distribution and transmission wires to all qualified sellers. The transmission and distribution of electricity would continue to be regulated because they will remain monopolies for the foreseeable future. The system would be restructured, not deregulated. Done correctly, this process can save consumers in their utility bills and reduce carbon emissions. A properly structured retail competition system can deliver electricity more efficiently, and just as reliably, as our present system of regulated monopolies.

Cost savings

Most experts are confident that restructuring will reduce the cost of electricity, although there is a diversity of views over the potential size of the savings. Because the industry is so large, even modest savings represent billions of dollars. DOE economists estimate potential savings of $20 billion a year, which would mean average direct savings of about $100 a year to a typical family of four and indirect savings to such a family through lower cost goods and services of about another $100 a year. Other studies predict far larger savings.

Carbon reductions

With appropriate market-based provisions, electricity restructuring legislation could reduce carbon emissions by creating incentives to produce and use electricity more efficiently and with less pollution. As emphasized at the White House Conference on Climate Change, two-thirds of the energy used to produce electricity is currently wasted. Restructuring should introduce incentives for reducing this waste heat. Restructuring legislation could also include other provisions -- such as various incentives and mandates to promote energy efficiency and renewable energy -- that offer potential carbon savings.

Next steps

The Administration looks forward to working with interested parties on crafting comprehensive electricity restructuring legislation.

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