End of a monopoly? New technology and public pressure are forcing changes in the electric utility business.

Electric power -- who generates and delivers it to customers, and how much it costs-has been held under tight state and federal regulatory control since the 1920s. Now, new technologies and low prices for natural gas are forcing utilities to be more competitive, and public demand for lower rates is pressuring state and federal governments to consider deregulating the industry.

In the process, state legislators are being buffeted by demands from consumers, utilities, businesses, labor, environmentalists and advocates for the poor and elderly -- all groups that play a role in restructuring the electric utility industry.

"I continually hear from individuals, small businesses and manufacturers who are finding it harder and harder to cope with rising electricity costs," explains New York Assemblyman Paul Tonko, chair of the Assembly Committee on Energy. "These customers need help, and they need it now. We must look at the opportunities that competition and restructuring provide for lowering rates."

Senator Michael Sanchez, chairman of a joint legislative committee that is examining industry changes in New Mexico, notes that it will be "crucial to balance the multiple interests involved if a state hopes to resolve all the issues in restructuring the electric industry."

"It is my sincere hope that when the change occurs that it will mean lower rates for all and not just an elite few," he said.

Those favoring competition and deregulation point out the large disparities in electricity rates: In California, the average rate is twice that of Washington; New Hampshire's is 30 percent more than New York's. Rate differences can even be found within a state. Although the cost of serving industrial customers is lower than homeowners, in a number of states the difference can be as much as 40 percent.

"Monopoly utilities have enjoyed a "free lunch' for too long," argues Senator Mark Montigny, a leading advocate of deregulation in Massachusetts. "They have the benefit of government protection, which results in inefficient regulation and high profits. Businesses and cost-conscious consumers are the losers. Competition and deregulation must prevail in order for rates to come down substantially."

On the other side of the debate are utilities, environmentalists and consumers advocates. Utilities unable to compete by lowering costs will be forced to face the consequences -- bankruptcy or buyout by another utility. Additional utility concerns focus on the recovery of their infrastructure investments that become "uneconomic" due to competition, referred to as "stranded commitments." The broad effects on the utility, its shareholders, and local and state economies will be substantial if plants shut down.

Environmentalists point out that state regulators have required utilities to provide energy efficiency services, promote conservation efforts and develop clean renewable energy sources. However, faced with increasing competition and pressures to provide electricity as economically as possible, they fear utilities would be compelled to eliminate many environmentally friendly programs.

Consumer advocates fear that utilities that lose industrial-size customers will try to recover lost revenue by raising rates on remaining consumers. Elderly and low-income homeowners, small businesses and rural customers in particular will suffer, they say.

Not wanting to wait for increased competition and deregulation to lower their rates, large electricity-consuming industries are currently prodding legislators and regulators to permit "retail wheeling," which allows a customer to buy electricity from cheaper suppliers. Local utilities would then be required to carry ("wheel") the power across their lines to the customers.

The argument goes that with lower electricity rates, these large consumers could stay competitive in their industries by lowering costs and passing savings on to those who buy their products or services.

"It would be an economic tragedy to prevent retail wheeling. We have calculated that the state's retail customers could have saved more than $3 billion over the last 10 years if they could have selected their electricity provider," says Senator Tom Wray of New Mexico. He sponsored a joint resolution this year proposing a state constitutional amendment to grant residents the right to select their electric service provider. It did not pass.

More than 20 retail wheeling bills were introduced in 11 legislatures this year. A retail wheeling pilot project has been authorized in New Hampshire. Rhode Island passed retail wheeling legislation that was later vetoed by the governor. Nevada approved retail wheeling in 1993 legislation in order to attract certain types of manufacturing industries, but no business has vet taken advantage of it.

Recent action to change how states regulate the industry includes legislation enacted this year in Indiana to approve alternative regulatory mechanisms if traditional regulation is no longer required. Bills passed in Delaware Illinois, New Jersey and Oregon also allow alternative regulations to be drafted. One popular alternative -- performance-based regulation -- ties how much profit a utility will be allowed to make to factors like the ability to lower costs or improve customer service.

The new regulatory approach is less a burden on the state and gives utilities more flexibility. Although there is only limited state experience, it is expected to result in less paperwork, less litigation and a decrease in regulatory oversight.

Lawmakers also are developing principles and guidelines for the transition of electric power production to a competitive, deregulated industry. Bills and resolutions in nine states have set up legislative study committees to evaluate and make recommendations on how the legislatures should proceed. Study groups and informal hearings are a staple for nearly half of the state regulatory commissions and ensure that "managed competition" and electric utility restructuring will continue to be the center of debate for some time to come.

In the midst of all the arguments on competition and restructuring, lawmakers are being asked to protect ratepayers, utilities and their shareholders, maintain state economic development and environmental agendas and ensure and affordable, reliable supply of electricity for all customers.