Electric companies may face competition.

Several states are considering proposals that would allow at least some customers to have the choice of purchasing power from sources other than their local electric company, indicates Robert Burns, a senior research associate at the National Regulatory Research Institute, Ohio State University. In a practice known as "retail wheeling," a customer in Ohio could shop for the best deal on electricity and decide to buy from a generating company in Indiana. The Ohio customer's local utility would be required to transmit the purchased power.

In Nevada, retail wheeling already is available for some large industrial customers. State regulators in California have proposed rules that would give the state's largest industrial customers the right to shop for electricity starting in 1996; commercial customers 1998; and all residential customers starting in 2002.

The reasoning behind retail wheeling is relatively simple, Burns explains. Under competitive pressures from other companies, electric utilities will be forced to become more efficient and cost-conscious. As a result, costs to consumers should go down. "In the long run, I think retail wheeling could benefit all consumers. But there are some serious problems that need to be considered in the short run."

For example, industries will be the first allowed to try retail wheeling because of the large amount of power they purchase, If utilities...