Electric utilities have historically been franchise monopolies, vertically integrated from power production through transmission, distribution, and customer service with no competition from other electric utilities. However, in many parts of the country, electric and gas utilities do compete. Rates charged by these utilities were determined in a regulatory proceeding: Electric utilities proposed rates that compensated them for their expenses and allowed them to earn a reasonable return; state regulatory commissions reviewed and approved the proposals.

This historical relationship between electric utilities and their regulators is undergoing a dramatic change. Policymakers are restructuring and deregulating portions of the electric industry. Restructuring of the electric industry is consistent with the deregulation of other U.S. industries since the 1980s. The objective in "restructuring " is to increase efficiency, lower costs, increase customer choices, and lower the prices paid by consumers in restructured industries...