DEREGULATION COULD REDUCE POWER BILLS (POWER PLAY: DEREGULATION IN THE 21ST CENTURY) (SECOND IN A SERIES)

Lone Star Industries spends $7 million a year on electricity to power its sprawling cement plant at Cape Girardeau.

The plant is the largest user of electricity in the area.

Deregulation of the electric industry would be good news for Lone Star if it results in lower electric bills.

John Burian, the plant's director of operations, said the business potentially could save money by shopping around for power.

Currently, it can't do that. The plant must buy its power from the local utility, Union Electric.

Burian said UE, to its credit, has kept rates "pretty modest" the last several years.

Deregulation proponents say everyone from the residential customer to the large industrial user would realize savings if the states and the federal government allow competition at the retail level.

They point to the deregulation of the railroad, airline and telecommunications industries as proof that competition benefits consumers.

Deregulation proponents project savings ranging from as low as 5 percent to as high as 45 percent.

If electric charges drop about 25 percent, it is estimated industrial users in Missouri could save nearly $15,000 a year, on average, from deregulation.

At that same percentage, commercial customers, on average, could save $1,320 annually. Residential users could save $204 a year.

In Illinois, which has higher-priced power, industrial users could see savings of $121,000 a year. Commercial customers could save $1,562 a year if electric utility charges drop about 25 percent. Residential users, on average, could save $206 a year.

Those estimates came from the office of U.S. Rep. Dan Schaefer, R-Colo. Schaefer has introduced a bill to deregulate the electric industry.

The estimates were calculated by a Washington, D.C., think tank.

Every year deregulation is delayed, the nation loses $190 billion a year in possible economic growth, said Dana Perino, Schaefer's press secretary.

The Competitive Enterprise Institute, another Washington think tank, projected a whole range of savings based on price cuts of 5 to 45 percent.

A 10 percent drop in average electricity prices would save Missouri $390 million annually, the institute said. Savings would range from $81 a year for a residential customer to $6,101 for the average industry.

A 10 percent drop in electricity prices would save Illinois $900 million annually. Savings in Illinois would range from $80 a year for a residential customer to $47,069 for the average industrial user, the institute said.

Clyde Wayne Crews Jr. is a fellow in regulatory studies at the institute.

He believes it is shortsighted to deregulate only the power generation end of the business. He wants the transmission and distribution of power to be deregulated too.

"I don't think that local distribution franchise monopoly is sustainable," Crews said.

Utility and regulatory experts argue that it isn't practical to allow competing transmission and distribution lines.

But Crews believes it can work. Phone, gas, cable television companies and railroads own rights of way.

These entities could team up with power producers and compete for customers if current utility franchises were abolished, he said.

For longer-range transmission competition, access to federally controlled rights of way along highways and Amtrak lines could be auctioned, he said.

Most of the nation is connected to a power grid. Crews said the power grid isn't a natural monopoly, but a political one.

"Utilities' stranglehold on customers exists solely because it was bestowed by government," he said.

In the early days of the electric industry, there were competing power and light companies in many cities. Competition kept retail prices low, he said.

When the states and then the federal government stepped in to regulate the industry, prices rose, Crews said.

Crews said that deregulating solely the power-generation part of the industry would render uncompetitive high-cost power plants and leave utilities begging for a $200 billion bailout so they can recover "stranded costs."

Utilities argue they incurred those costs under today's regulatory framework and should be allowed to recover those costs from the rate payers.

That could mean phased-in deregulation and a more gradual drop in electricity prices at the retail level.

Crews said the emergence of natural-gas micro-turbines that can power a home or small business may one day make the current interconnected transmission and distribution grid obsolete.

Such units could make on-site generation the norm, he said.

Tuesday: Area utilities view deregulation.