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Can Competition Be Made To Work? products, mobility of facilities, net- work characteristics, availability of substitutes, extent of common costs, size of capital investment, and access to essential transport facilities. These factors affect the degree of com- petitiveness by influencing the number of buyers and sellers, cost structures, the degree of vertical integration, and barri- ers to entry. Taken together, these influences determine the market struc- ture. Two other conditions necessary for competition are price flexibility and ac- cess to the same information by buyers and sellers. The absence of barriers to entry is vi- tal. According to economist G.C. Archibald, economists who have written classic studies on the nature and practice of competition found "that the competi- tive mechanism worked not only through prices but, most importantly, through en- try of firms." Given a situation where barriers to entry, lack of information, and inflexible prices exist, no harm is done and signifi- cant benefits are likely if barriers to en- try are removed before addressing information and pricing problems. In sharp contrast, significant harm is as- sured if price flexibility precedes removing entn- barriers, as the Califor- nia experience showed. Price flexibility does not imply a concomitant increase in average prices. A change in the structure of prices does not mean that returns to bond or equity holders have to be in- creased, and, consequently, average prices need not change. Entry barriers can be artificial or nat- ural. The central artificial barrier in the electric utility industry is the continuing lack of non-discriminatory access to the transmission system. Although the Fed- eral Energy Regulatory Commission has held numerous hearings and issued nu- merous regulations and orders aimed at solving this problem, it has had far greater success relaxing price regulation, resulting in significant economic harm to large groups of consumers, than in pro- moting effective access. Federal and state efforts to deregulate the electric utility industry have generally produced results that do not comport with basic notions of what competition means. The daily pages of the industry press provide abundant examples of prices that do not reflect costs, serious transmission access problems, and private fine behavior and performance that con- tradict the conditions and criteria outlined above. The belief that competition can be made to work assumes that the inherent, economic characteristics of an industry have little impact in determining where an industry lies on the monopoly-compe- tition spectrum. N atural conditions that ~~ork as barriers to entry in the electric industry include technology, product dw-ability, substitutes, cyclical and seasonal demand, mobility, and network characteristics. Most important is the nature of the industry's production fa- cilities. It is widely recognized that the electric power industry is very capital- intensive. Its costly facilities are not Not Sure Which AMR Technology You Will Choose? ,`, Available Configurations • Form 25 240V • Form 125 208V • Class 320 • Polycarbonate or glass covers • Others coming soon •~ ~pi1111igII~IINflH9I{~ C42Ri! 240V 3v 3^~+i Ft2 23 K41.0 ~~~ icon zo~dooak ooa usa ~~y .,...,, , nn+ \`\\ 7sv~'tbaard dQsi~ ~ ~'~'? s ~t ',Ey upQYa4tfadb'~e ,. `% G']} ~rendyiDtrfr~?s~;ediNith: u Sews ft~dirtRead -'- _ ~.~ ii~nL,TS~Transcelver,, '.~, 11~r7 S7 ES5 EIdT' *~ dr4 .. ~. TM ICON • Hexagiam STAR MT1J ~ ,. Advanced Sensor Technology • Accuracy exceeds ANSI C12.20 (Class 0.2) • ANSI compliance in performance and mechanical design • Designed for billing accuracy • Complete DC immunity Sensus Metering Systems ~ ~'+ ^~~r T("+ 7501 Ardmore Boulevard • Pittsburgh, PA 15221 USA / JVV_1 UJ i80oMETER-IT•www.sensus.com•askicon@sensus.com ~/ METERING SYSTEMS 16 JANUARY-FEBRUARY 2005 PUBLIC PUWER