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The Grid: Q&A with Ken Zimmerman on electric utility deregulation

Former Oklahoma Corporation Commission energy chief Ken Zimmerman describes electric utility deregulation and why he helped led a team responsible for stopping deregulation from taking place in Oklahoma.
by Adam Wilmoth Published: September 1, 2013


Former Oklahoma Corporation Commission

energy chief Ken Zimmerman

Q: What is deregulation?

A: The term deregulation is a misnomer. They're just changing the form of regulation. Most electric utilities are regulated by state commissions. Most commissions have many options on how to set up pricing of electric services.

One option is a competitive market, which means you try to find a way to allow other providers of services to provide services aside from the utility itself. People started looking at that as a possibility. That's still regulated in that you can't set the price anywhere you want it to be. It still goes through a regulatory process.

There are two kinds of things we can get when you buy electricity: we can buy the kilowatt-hours that come out of the plant, or we can buy the plant itself. Most states set up a competitive market to buy the kilowatt-hours. They have allowed other plants to sell kilowatt-hours to customers, sometimes directly by signing up a customer and sometimes indirectly by selling kilowatt-hours to the utility, which them sends them to customers.

Some states set up a plant sale through competitive bidding. They set it up in a way to have the plant provide the services and also provide that the plant through a competitive bidding process. That was the minority. Most states went with the energy part.

Q: I understand you are largely responsible for blocking deregulation in Oklahoma. What happened?

A: I didn't do most of the work. We had a very good team. I was just the guy who talked all the time.

We looked at whether restructured regulation would benefit Oklahoma or not, and if it were to change, would Oklahomans benefit. Any time you would be getting power from other areas, you have to consider what their costs are and what that would do to power in that state.

We concluded that if Oklahoma did that, it would increase the cost of power in the state because the cost of those providers was more expensive than what we had in the state.

Q: How did your effort affect Oklahoma consumers?

A: Initially it stopped us from having a price rise. If we would have gone that direction, it would have been an increase in prices. I don't know how much of an increase it would have been, but I suspect it would have been quite dramatic. Bills could have gone up 100 or 200 percent. It would have been quite noticeable. Most regulators see that kind of rate shock as totally unacceptable.

Also, it gave us time to fix the real problems. There were serious problems with the existing system. One problem was that the states were trying to figure out how to pay for generation capacity. If a utility built a gas-fired plant in 1971, it cost $50 million. In 1981, it cost $400 million.

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by Adam Wilmoth
Energy Editor
Adam Wilmoth returned to The Oklahoman as energy editor in 2012 after working for four years in public relations. He previously spent seven years as a business reporter at The Oklahoman, including five years covering the state's energy sector....
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