Comments of the R Street Institute on Anticompetitive Regulations in the U.S. Electric Power Industry

May 27, 2025

Antitrust Division
U.S. Department of Justice
950 Pennsylvania Ave. NW
Washington, D.C. 20530

Comments of the R Street Institute on
Anticompetitive Regulations in the U.S. Electric Power Industry

I. Introduction

America’s most entrenched monopolies are found not in technology or manufacturing, but in the electric power industry where state and federal regulations create barriers to entry that foreclose competition and the low prices, better service, and innovation competitive rivalry promotes. On Jan. 31, President Donald J. Trump signed Executive Order (EO) 14192, aimed at eliminating unnecessary regulatory burdens.^[1] On Feb. 19, President Trump signed EO 14219 directing agencies to review existing regulations, particularly those that “impede private enterprise and entrepreneurship.”^[2] In response, the Department of Justice (DOJ) established the Anticompetitive Regulations Task Force (“the Task Force”) to advocate for the elimination of state and federal regulations that undermine competitive market forces.^[3] The R Street Institute (RSI) appreciates the opportunity to engage with the DOJ’s efforts to strengthen competitive markets and promote consumer welfare. To that end, RSI submits these comments to help the Task Force identify electric-power regulations that foreclose competition and to recommend reforms.

The United States has long benefited from a principled commitment to economic liberty, market competition, and limited government intervention. Over a century ago, state policymakers and industry leaders adopted the regulated monopoly model for local electric utilities, believing it would better serve the public interest.^[4] Whatever merits this approach may have had then, it is increasingly clear that today’s electric power industry should embrace greater competition at all levels. Three decades ago, significant regulatory reforms at both state and federal levels introduced competition into the electric industry. At the wholesale level, competition has brought about substantial improvements in operational efficiency and, together with abundant natural gas supplies, pushed down electric energy costs.^[5] Several states have also experimented with retail electric competition, showing benefits in areas where retail competition has been implemented well.^[6] Yet much of the electric industry remains subject to outdated regulations that promote industry capture rather than consumer welfare. Too often, incumbent utilities leverage entrenched monopoly positions and influence in regulatory forums to block competitors, preserve market dominance, and maintain inflated costs at consumers’ expense.

This comment integrates legal and economic analysis, empirical studies, and industry evidence to show how specific regulations result in utility privileges that suppress competition and inflate costs. From these findings, we distill a concise reform menu:

• End right‑of‑first‑refusal (ROFR) for transmission projects
• Expedite federal and state siting
• Reconsider natural monopoly arguments used to justify state-granted monopoly in retail electric power services
• Eliminate unproductive grants of monopoly
• Quarantine residual monopoly sectors of the electric power industry
• Strengthen independent oversight

The result is a practical roadmap for reinstating market discipline to the electric grid and delivering lower prices, greater reliability, and faster innovation for American consumers.

II. Anticompetitive Regulation in Electric Power: Context and Current Issues

State regulators established monopoly service territories for electric utilities based partly on natural monopoly arguments and the assumption that cost-of-service regulation could mimic the discipline that competitive markets otherwise provide.^[7] The DOJ’s Antitrust Division (“the Division”) provides a critical perspective on the permanence and implications of such structures, particularly through its experience with the landmark AT&T case initiated in 1974.^[8] At the time, many observers questioned the wisdom of breaking up a seemingly efficient, integrated entity and warned of potential damage to vital national infrastructure. Despite these fears, the consensus emphasizes the profoundly pro-competitive outcomes of the AT&T divestiture. By separating regulated local telephone monopolies from potentially competitive segments, such as long-distance services and equipment manufacturing, the breakup is credited with unleashing unprecedented innovation and competition in communications. The subsequent flourishing of the internet, wireless communications, broadband services, and fiber optics—along with dramatic reductions in long-distance prices and substantial increases in service usage—offers evidence that the regulated monopoly structure had stifled progress. Echoing the telecom split, structural separation that leaves regulated utilities with the grid, spins off contestable activities to independent firms, and fully quarantines monopoly segments offers the surest path toward lower rates and faster innovation in today’s electric sector.^[9]

To the extent that monopoly protection is to persist, advocates must show how and why it continues to serve consumers. Decisions to implement monopoly franchise protections for electric utilities are defended as good for consumers; however, many examples exist of strategic behavior by regulated utilities squarely opposed to regulatory policy and consumer interests. For example, a Florida utility designed a 176-mile transmission project at just below the regional threshold so it could treat the project as “local” and avoid requirements for competitive bidding.^[10] Transmission owners in Ohio have steered roughly $6 billion of comparable projects through similar loopholes.^[11] Duke Energy is defending antitrust claims that it cross-subsidized temporary price cuts and above-market power purchases to deter an independent generator.^[12] Entergy reportedly undercut a $100 million merchant line to justify building a $1 billion regulated plant it would own, while American Electric Power imposed a customer moratorium in Columbus, Ohio, unless new loads prepaid for decade-long system upgrades.^[13] Regulated electric utilities in multiple states lobby state lawmakers for ROFR protections against competitive discipline in transmission spending.^[14] And in a widely publicized utility scandal, federal prosecutors allege that FirstEnergy paid about $60 million in bribes to secure legislation that shifted the costs of two uneconomic nuclear units onto all Ohio ratepayers.^[15]

Economic theory gives us little reason to be surprised. Monopoly suppliers have both the opportunity and the incentive to seek above-normal returns. Cost-of-service rules invite an Averch-Johnson bias toward over-investment.^[16] Information asymmetries in rate cases let utilities gold plate while regulators grope for “just and reasonable” numbers.^[17] Leibenstein’s “X-inefficiency” predicts slack internal discipline,^[18] while Stigler’s model of regulatory capture explains how regulated firms can bend oversight to their advantage.^[19] Finally, standard principal-agent problems, moral hazard, and rent seeking provide further reason to avoid reliance on monopoly arrangements.^[20] In short, analysis supporting the natural monopoly justification for regulated monopolies underscores why regulatory vigilance remains essential. However, given the challenges inherent to regulatory oversight, policy should restrain monopoly and encourage competition to the highest degree possible.

A. Evidence on Competition and Monopoly in Transmission

A growing body of empirical literature measures what consumers pay when high-voltage transmission remains a protected monopoly and what they save when development opens to rivalry. A recent survey of nine optimization studies shows major economic stakes, citing findings from one European analysis that claims holding interregional transfer capability fixed at today’s level raises total system costs by roughly 30 percent—thereby illustrating the magnitude of potential savings when expansion keeps pace with generation changes.^[21] Those model-based projections have real-world corroboration. Using 2022-2023 market data, researchers estimate that relieving today’s binding interregional constraints would have lowered generation costs by $5.8 to $7.1 billion in 2022 and $3.4 to $5.0 billion in 2023.^[22] A related study finds that stalled Midcontinent ISO-Southwest Power Pool tie lines left roughly $2 billion in annual efficiency gains unrealized in 2022, while four incumbent utilities would have forfeited $1.3 billion in congestion revenue had the projects proceeded—a clear incentive for the incumbents to resist new lines.^[23]

Procurement method matters as well. A Brattle Group study comparing competitively bid projects with utility self-builds finds cost differentials of 20 to 30 percent in favor of open solicitation, even when incumbent utilities ultimately win the work.^[24] A separate R Street brief focused on the Midwest estimates that repealing Minnesota’s ROFR statute could save customers roughly $1.1 billion over the life of planned regional projects, while enacting a similar ROFR in Missouri would add about $290 million in costs.^[25]

Taken together, the evidence indicates that monopoly control over transmission development inflates costs and delays beneficial expansion, while competitive solicitation and the removal of statutory barriers deliver substantial consumer benefits—findings directly relevant to the Task Force’s examination of utility privileges.

B. Evidence on Retail Competition and Structural Separation

A growing empirical record shows that retail choice can reduce customer bills but may require structural separation of the distribution monopoly from generation and supply to achieve that outcome. Using a synthetic-control counterfactual, one study finds that restructuring lowered average electricity prices by $4 per megawatt-hour (MWh) across all sectors and $7 per MWh for residential customers, equal to about $77 per household each year.^[26] These savings arose because competitive suppliers passed through falling natural-gas costs more quickly than cost-of-service utilities. Although another study implementing the same approach with different underlying data found mixed price effects from competition, it still showed efficiency gains for some retail-choice states.^[27]

Ohio’s experience illustrates the limits of choice without quarantine. A study of customer bills showed that distribution utilities imposed non-bypassable riders that raised residential bills 4 to 6 percent while shifting risk away from utility shareholders after retail competition was introduced.^[28] The authors trace this increase to incomplete functional separation—generation losses were socialized even as supply competition expanded. Economic theory and legal analysis offer additional support. When the default-service incumbent controls the wires, entry costs rise, innovation slows, and the utility retains tools to cross-subsidize its own offerings at rivals’ expense.^[29] The consequences of incomplete structural separation—failure to quarantine the monopoly—are also seen in New Hampshire, where regulated transmission and distribution utilities are lobbying for non-bypassable charges levied on all consumers to cover company losses incurred providing default retail supply service.^[30]

Taken together, these findings suggest that retail choice and structural separation are complementary. Consumer savings emerge when customers can switch providers and when structural unbundling, limits on non-bypassable riders, and transparent cost allocation contain the residual monopoly. These design principles resonate with the Division’s historical preference for structural remedies and RSI’s advocacy for market-driven innovation.

C. System Performance Outcomes: Reliability and Decarbonization

System-wide metrics tell a consistent story: When generation is exposed to market discipline, reliability does not erode—it improves. Unit-level panel studies find that restructuring lowers forced-outage rates and non-fuel operating costs, signaling higher plant availability at moments of system stress.^[31] Similar work on the nuclear fleet reports a nine-percentage-point jump in average capacity factors once units were transferred to merchant ownership.^[32] An academic assessment of the economics of electric reliability underscores that generation shortfalls are rarely the root cause of customer outages: 87 percent of outage minutes originate on regulated distribution lines rather than in bulk power supply.^[33] Skeptics point to rolling outages in Texas or California as demonstrating the failures of markets to support reliability, but post-mortems attribute those events to weatherization and permitting failures—policy variables that also constrain vertically integrated systems.^[34] Echoing that assessment, a contemporary policy review attributes today’s shortage fears to regulation that suppresses price signals and delays entry rather than to any flaw inherent in competitive markets.^[35]

Markets also lead on emissions performance. An examination of eGRID data from the U.S. Environmental Protection Agency suggests that ISO regions cut power-sector carbon dioxide emissions by 35 percent from 2005 to 2019 versus 27 percent in monopoly regions, while carbon intensity fell 39 percent and 32 percent respectively.^[36] Competitive footprints accounted for roughly 80 percent of national coal-retirement capacity and a similar share of utility-scale renewable deployments over that period, confirming that transparent price signals reward low- or zero-marginal-cost resources and hasten the exit of high-emitting units. Detailed unit-level analysis across four organized markets shows that cheap natural gas and expanding wind output account for almost the entire 25 percent drop in coal generation from 2008 to 2013.^[37] The authors observe a weaker response in the Southwest Power Pool, perhaps due to the greater presence of vertically integrated utilities relative to deregulated power plants as compared to other markets.^[38] Where market incentives are allowed to discipline investment and operational decisions for electric generation, the record shows higher performance, fewer emergency alerts, and faster emissions declines than in monopoly regimes.

III. Policy Recommendations and Conclusions

The calls in recent executive orders to “alleviate unnecessary regulatory burdens” and to review rules that “impose undue burdens on small business and impede private enterprise and entrepreneurship” are entirely consistent with RSI’s mission to advance free markets and limited, effective government.^[39] Guided by that mission, RSI holds that economic liberty—not monopoly privilege—should be the default in electricity markets.

Our overarching and primary recommendation is that the Division should reignite the national conversation about electric utility restructuring, inquiring into rationales for foreclosing competition and re-weighing the evidence behind those rationales.

As noted above, state and federal laws and regulations—beginning fundamentally with state monopoly franchise laws—create significant and largely unnecessary barriers to competition. Government policy should only support monopoly for those elements of the industry where monopoly is proven to better serve consumer welfare than competitive rivalry. However, even in those instances, regulation must be implemented carefully to protect consumer welfare. The narrower recommendations that follow offer ways to boost competition while the broader conversation proceeds and provide best practices to contain any residual regulated-monopoly elements.

A. Broadening Competition in Transmission Development

1. Limit or remove ROFR provisions. State and federal ROFRs for transmission expansion let incumbents lock out potential rivals and limit potential solutions, driving higher consumer costs. The Division should continue advocating against state and federal ROFRs.
2. Support competitive regional transmission planning and procurement. Incumbent-dominated planning processes and “local project” carve-outs sidestep the intent of federal rules seeking to promote more efficient cross-utility transmission planning. The Division should urge the Federal Energy Regulatory Commission (FERC) to close these loopholes and require independent, regional evaluation of all proposed transmission projects using economic criteria and competitive bidding.
3. Establish independent transmission monitors (ITMs): Utility-driven and opaque planning and cost-recovery processes give utilities an information edge and invite self-dealing. ITMs can supply independent data, vet alternatives, and flag anticompetitive conduct. The Division should promote full evaluation of ITMs in appropriate policy venues.

B. Broadening Competition in Generation and Retail Direct Access

1. Enable direct retail access for sophisticated customers in states that have not restructured: Commercial and industrial buyers in monopoly states routinely pay 10 to 25 percent above competitive offers and lack the flexibility to sign bespoke renewable purchase power agreements, whereas retail choice states like Illinois and Ohio report nine-figure annual savings and more innovative hedging products. The Division should urge states to lift franchise restrictions for customers above a one-megawatt threshold, prohibit punitive exit fees, and guarantee non-discriminatory delivery tariffs.
2. Mandate competitive all-source generation procurement to serve captive retail customers: Utility self-build bias inflates costs, whereas technology-neutral solicitations in Colorado and Indiana delivered record-low bids and sped retirement of inefficient, expensive legacy generation. To serve customers that lack retail access, the Division should champion independent, all-resource requests for proposal and oppose rules that let utilities dodge open bidding.
3. Review utility planning practices for anticompetitive effects: Utility-run integrated resource plans (IRPs) and other processes shaping investment decisions often privilege incumbent assets and ignore regional market alternatives, leading to higher prices and reliability gaps. The Division should scrutinize state rules governing utility planning processes such as IRPs and file competition advocacy that demands objective modeling, market testing, and support for competitive procurement options.

C. Federal and State Permitting Reforms to Reduce Entry Barriers

1. Streamline federal permitting processes: Duplicative, multi-agency federal reviews inflate costs and timelines, while open-ended judicial challenges grant incumbents repeated opportunities to derail potential competition. The Division should advocate for streamlining permitting processes as a competition issue.
2. Standardize and expedite state siting procedures: A patchwork of state-by-state rules leaves interstate line expansion piecemeal and haphazard, stretching development timelines to 10-plus years and letting pass-through states veto projects. The Division should back uniform siting timelines and a strengthened federal backstop for linear infrastructure to curb parochial holdups.
3. Facilitate interregional transmission projects: Incumbent utilities exploit balkanized planning to block lines that would let cheaper out-of-region power compete, inflating costs and straining reliability. The Division should promote policies that prioritize competitive interregional lines and align cost sharing with demonstrable consumer gains.
4. Ensure permitting parity for competitive projects: Many state laws give incumbent utilities preferential rights-of-way, eminent-domain authority, and cost-recovery protections while denying access to such tools for independent, market-financed projects. The Division should oppose preferential rules for incumbents and advocate for permitting criteria that allow competitive entrants to build on equal footing.

D. Quarantine the Monopoly

1. Clearly separate regulated monopoly from competitive generation and retail sectors: Because ring-fencing and affiliate codes leave the parent company’s balance sheet, data, and political muscle intact, the failure to fully quarantine affiliates still tilts competition and allows for cross-subsidization behind the corporate veil. The Division should advocate for restraining the monopoly franchise to only those industry sectors in which monopoly clearly outperforms competition and seek full ownership of the unbundling of generation and retail sectors from the poles-and-wires monopoly.
2. Implement robust competitive safeguards to prevent incumbent abuse: Conduct-based remedies have proven porous—utilities exploit control of interconnection queues, customer data, and billing platforms to impede rivals even after formal functional separation. The Division should default to structural solutions (e.g., ownership separation, independent system operation, and open-access data platforms) and use behavioral rules only as gap fillers.

E. Enhance Governance and Address Regulatory Capture

1. Improve regional transmission organization (RTO) governance structures: Laws and practices that protect incumbents and grant them outsized political power undermine RTO independence and limit FERC’s toolbox to check utility behavior. The Division should press FERC to reopen the issue of RTO governance to promote greater independence, facilitate neutral director-election processes, mandate RTO membership, and require regular third-party performance audits to better align governance with consumer interests.
2. Reduce incumbent utilities’ undue influence on state regulatory processes: Monopoly earnings are routinely recycled into lobbying, campaign donations, and even rate-payer-funded philanthropy that secures favorable legislation and public utility commission outcomes—behavior highlighted by the ComEd and FirstEnergy scandals. The Division should urge states to bar recovery of lobbying and political expenses in rates and provide guidance on the degree to which ex parte practices run afoul of antitrust and competition law.

These recommendations give practical effect to EOs 14192 and 14219 and squarely advance the Task Force’s charge with respect to policies governing the electric power industry, trading entrenched monopoly privilege for a pro-competition framework wherever natural-monopoly conditions do not hold. Ending ROFR statutes, expediting siting, revisiting outdated franchise grants, and “quarantining” the residual wires monopoly will draw in lower-cost capital and encourage disciplined private risk taking. Competitive bidding alone lowers transmission project costs by 20 to 30 percent, while robust retail choice broadens product variety and promotes efficiency. Together, these changes would drive more-efficient investment; strengthen resource adequacy and operational resilience; expand genuine consumer choice; and accelerate the diffusion of advanced, lower-emission technologies. The payoff will be a cleaner, more reliable and innovative electric power industry.

Respectfully submitted,

Michael Giberson
Senior Fellow, Energy
R Street Institute
mgiberson@rstreet.org