As readers of Adam Smith know, the market functions to provide consumers with goods and services at the lowest price (within limits set by law). Yet, several years ago, we submitted a piece claiming that restructuring the electricity industry had not produced noticeable consumer benefits, and the irate peer reviewer (we suspect a big shot restructuring maven ) retorted that you can’t prove a negative but added, “Who said that restructuring was supposed to benefit consumers?” On the first point, we simply opined that consumer benefits were not evident. (Maybe the situation would have been worse without restructuring, for all we knew, but evidence for benefits seemed limited). As for the second point, we took it for granted that the consumer was supposed to be the ultimate beneficiary, not market players or consultants. Were we naive?To check on whether those conclusions still hold, we periodically examine the price of electricity by segmenting it into three parts: “Fuel and renewables”, “Utility” and “Other”. Competitive forces, we reasoned, should reduce those components of the cost structure subject to market forces, and the utilities would continue no more or less productive than before.Advocates had predicted restructuring savings as high as 40%. On the other end, one management consultant concluded that if all utilities employed best practices, they could save about 10%, not chump change but not revolutionary, either.Related: IEA Sees Massive Oil Surplus In 2027 As Middle East Supply ReturnsThe figure below shows that, in 1990-2000, as the industry geared up for competition, the real price of electricity fell 17%, with fuel costs accounting for 7% points of the fall. In other words, the industry hit the predicted savings in anticipation of full restructuring. After that, prices tended to move up and down with fuel costs. The “Other” component of price did not contract significantly, either. If some expenses fell, others must have filled the empty space. Don’t get hung up on year- to -year comparisons, though. Look at the trend. Not much happened in the aggregate. That conclusion stands. But let’s not complain too much, either. Real price increased by less than 0.1% per year for the period covered. That was the past, a period of low growth, low inflation, low interest rates, and inadequate capital spending. The industry had 25 years to wring out unnecessary costs, so can we expect substantial savings in the future to dampen price increases? Looking forward, the Energy Information Administration projects a small decline in the real price of electricity for 2025-2030. We are inclined to think that the picture looks less benign, to speak in euphemisms,Doing some back-of-the-envelope calculations, based on industry capital spending forecasts (probably too low), we think that the “Utility” component of real price per KWH could rise 5% a year. Just that could add 1.5% to the real price of electricity each year. Should we assume that all remaining costs will decline in order to produce no real price increase for electricity? Not likely.Consider the “Fuels and renewables” segment. More renewable energy might reduce costs, but in roughly half the country, natural gas sets the price in electricity markets, even for electricity not generated by gas. The USA produces adequate volumes of natural gas, but government policy seems aimed at exporting it as LNG, which will diminish local supplies for electric generation, just as the government closes down renewable projects that would ease natural gas demand. We’d bet that the real price of natural gas rises, in which case the wholesale price of electricity in many markets will rise even if overall generating costs do not.“Other” includes administration, marketing, trading, and union labor costs, that is, charges by well-entrenched and influential interest groups that know how to defend their share of the pie. Congestion charges could prove to be the wild card, though. They have been running at at 2-4% of the national electric bill. Experts, however, say that the industry is constructing less than one-fifth of the transmission lines it needs, and with AI centers demanding more power in a hurry, shouldn’t we anticipate even higher congestion charges?Price per KWH, of course, only tells part of the story, which should include quality of service (possibly declining) or energy equity (costs rising more in some places and consumers having less ability to pay), or false economies achieved by deferring environmental costs to the future (let the kids pay for them). Those were not in our cost calculations and, as far as we know, not in anybody’s.In short, if restructuring, deregulation, and competition did bring about substantial operating savings, they seem to have gotten lost somewhere before reaching the consumers. The most recent numbers don’t say otherwise. As for the near future, absent major changes in government policy or market structure, we see a pileup of deferred costs coming along during a period of higher interest rates, inflation, rising demand, and environmental hazards, all of which point to a rising real price of electricity and all the consequences thereof. Seems kind of obvious, doesn't it? Maybe, then, we are asking the wrong question. Everyone knows that prices will rise. The bigger question is, given the circumstances, can the electricity industry deliver the goods?By Leonard Hyman and William Tilles for Oilprice.comMore Top Reads From Oilprice.comECB: Iran Peace Deal Won't Erase Europe's Energy Price ShockFalling Murban and Dubai Prices Open Arbitrage to U.S. and EuropePoland Moves To Tax Fuel Windfalls Earned During Iran War