Competition at the Grid Edge: Innovation and Antitrust Law in the Electricity Sector

Posted by Social Science Research Network

Competition at the Grid Edge: Innovation and Antitrust Law in the Electricity Sector

 Michael W. Wara (Stanford Law School)

Abstract:      The advent of distributed energy technologies, most notably, distributed solar energy, poses a competitive threat to the electric utility industry. Here I provide a comprehensive assessment of the U.S. electric utility industry’s regulatory response to this threat over the past three years. Electric utilities across the United States are asking their Public Utility Commissions for changes in rate structures that, depending on their details, may either reduce cross-subsidies to distributed energy resources or may be erecting much higher barriers to entry for innovative energy technologies and business models. Usually, a utility’s actions are exempt from antitrust scrutiny under the State Action Immunity and Filed Rate doctrines. I argue that in the case of the utility response to distributed energy, this may not be the case. Because the risk exists, both electric utilities and their overseeing commissions need to make much greater efforts to evaluate the competitive impacts of changes in rates – a consideration that is largely absent from the proceedings to date. By doing so, they will both ensure that society’s interest in a cleaner, more innovative, more productive energy sector is protected and at the same time minimize their own risks of liability under the antitrust statutes.