consumer spending was facilitated. Thus, among the goals implicit in deregulation are: 1) spurred competition and loosening of barriers to market entry; 2) offering more purchase options to consumers; and 3) fostering consumer willingness to spend on services and goods (Solomon, 1990).
Deregulation has not always succeeded in achieving its goals; in fact, deregulation can have the unintended but perhaps inevitable effect of reducing service or product quality and customer satisfaction. Birnbaum, del Agujia, Orive and Lekander (2002) noted, that as the public utility providers of electricity were deregulated in the United States and around the world, customers assumed that they would benefit in terms of lower service costs and greater choice in selecting an electricity provider. It was assumed that in place of government agencies compelling them to pay for capacity that far exceeded any imaginable need, markets would more closely and cost-effectively match supply to demand.
At first, deregulated electricity markets were seen as following this script: wholesale prices went down by 20 to 50 percent, services improved, and the generators' profits fell (Birnbaum, et al, 2002). Over time, however, customer satisfaction in cases such as that of California -- where electricity prices increased dramatically and service quality declined after deregulation -- has proven to be unstable. It is possible that positioning public utilities such as natural gas and electricity as a "commodity" that should not be closely regulated may create an opportunity for firms to take advantage of their clients, generating unacceptably high prices and declines in customer satisfaction and overall service quality.
In discussing electricity regulation, Thomas (2002) noted that the California energy crisis of the Summer of 2000, the world crisis after September 11, 2001, and the implosion of Enron Corporation all serve to illustrate the flaw inherent i...