Federal antitrust regulators have been active in the tech and labor markets, yet they have not focused on one of America’s most enduring monopolies: public utilities that control access to the electric grid. Notably, public utilities often use their market dominance to raise prices and block new, more efficient competitors from entering the market. This anticompetitive behavior generally occurs at the expense of consumers and sometimes violates federal antitrust laws.
A recent case involving Duke Energy in North Carolina has highlighted the issue. Duke, which operates under a state-granted monopoly, leveraged its market control to counter cheaper and more efficient wholesale service provided by an independent company. Duke managed to fight back by lowering its prices for existing contracts and making agreements to purchase power at inflated rates from small municipal plants to retain their business. Such practices underline the imbalance and unfair competitive advantage enjoyed by entrenched utility monopolies.
Utility monopolies like Duke energy can place investment risks on captive customers and profit if the investments succeed. This kind of market power abuse has been documented for decades, and the Duke case serves as a recent reminder of the harm posed by unchecked electric monopolies.
The US Court of Appeals for the Fourth Circuit found that Duke might have violated antitrust laws, allowing the case to proceed in district court. Nevertheless, this suit was brought by an independent competitor, not by federal antitrust authorities charged with upholding these laws. Although antitrust regulation is recognized as an essential tool for energy regulation, federal agencies have not focused adequate attention on the energy sector in the past decade.
The case, Duke Energy Carolinas v. NTE Carolinas II, highlights the need for both federal and state regulators to mitigate the anticompetitive behavior of public utilities. States could force utilities to sell their generation assets or require them to join independent organized wholesale markets to increase competition and decrease the potential for utilities to shift costs onto captive customers. Such regulatory actions could reduce electricity costs, improve system reliability, and facilitate the entry of more efficient and sustainable resources into the energy market.
The increasing frequency of severe blackouts and the need for new, cheaper, and cleaner energy suppliers to access the grid underscore the urgency for regulatory intervention. Utilizing antitrust laws to curb the anti-competitive practices of utility monopolies is essential to ensuring fair competition and ultimately reducing electricity prices for consumers.
Read the full article on Bloomberg Law.