Electricity Restructuring Background: The Public Utility Regulatory Policies Act of 1978 & the Energy Policy Act of 1992

Publication Date: May 1998

Publisher: Library of Congress. Congressional Research Service

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Research Area: Energy

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Abstract:

Electric utilities have been subject to comprehensive federal and state economic regulation since enactment of the Public Utilities Holding Company Act of 1935 (PUHCA) and the Federal Power Act. This regulatory framework remained virtually unchanged between 1935 and 1978. The oil embargoes of the 1970s created concerns about the security of the nation's electricity supply leading to enactment of the Public Utility Regulatory Policies Act of 1978 (PURPA). For the first time, utilities were required to purchase power from outside sources. This first incremental change to traditional electricity regulation started a movement towards a market-oriented approach to electricity supply. Following the enactment of PURPA, two basic issues stimulated calls for further change: whether to encourage nonutility generation and whether to permit utilities to diversify into non-regulated activities. The Energy Policy Act of 1992 (EPACT) increased competition in the electric generating sector by creating new entities that can generate and sell electricity at wholesale without being regulated as utilities under PUHCA. PURPA began to shift more regulatory responsibilities to the federal government, and EPACT continued that shift away from the states by creating new options for utilities and regulators to meet electricity demand. As the electric utility restructuring debate evolves, additional policy issues to be addressed may include federal-state jurisdictional roles, stranded cost recovery, industry structure, and non-economic regulatory factors.