Background
The U.S. has regulated utilities to protect the public interest and limit monopoly pricing for over a century. Utilities are granted exclusive service territories. Because of this, rate regulation is needed to prevent high prices and other abuses associated with monopolies. Most states have laws that require public utilities to charge all consumers fair and reasonable rates and provide service that meets quality and safety standards. In exchange, the government allows utilities the opportunity to earn a reasonable profit or return on their investments, as determined by regulators. Telecommunications markets and some energy markets have been opened to unregulated or lightly regulated providers.
Introducing competition has resulted in less oversight and often more problems for consumers. Competition alone has not been sufficient to produce fair prices and necessary consumer protections. However, even in areas where utilities retain monopoly status, new forms of regulation have also often reduced oversight and consumer protections. No matter the regulatory structure, policymakers can increase accountability and improve consumer outcomes by establishing a robust and independent consumer advocacy office, ensuring transparency in all decision-making processes, and increasing public participation.