When a utility's primary role is taking care of its own customers, there is a strong incentive to carefully maintain its transmission and distribution system. Once the system is divided into many competing entities, many of whom do not have financial ownership of the transmission system, the situation changes significantly. Some of the impacts include:
1. Declining investment. There is less incentive to maintain transmission lines, since under a fractured system, no one has real responsibility for the lines. Also, profits are higher if equipment is allowed to run until it fails, rather than replacing parts as they approach the ends of their useful lives.
2. Overuse of lines between systems. Prior to deregulation, transmission lines between utilities were designed for use primarily in emergencies. Once widespread trading of electricity began, lines between utilities are put into much heavier use than they had been designed to handle.
3. More rapid deterioration. After deregulation, there is much more cycling on and off of power plants and the structures involved in transmission, to maximize profits by selling electrical power from the plant that can produce it most cheaply. This results in metal parts being heated and cooled repeatedly, causing the metal parts to deteriorate more quickly than they normally would.
4. Unplanned additions to grid. Wind and solar are added to the grid, with the expectation that the grid will accommodate them. "Merchant" (investor owned) natural gas power plants are also added to the grid, sometimes without adequate consideration as to whether sufficient grid capacity exists to accommodate the additional production.
5. Difficulty in assigning costs back. Since the industry is more fragmented, if any transmission lines are added, the cost must somehow be allocated back to the many participants who will benefit. Ultimately, the cost must be paid by a consumer. These consumer rates may in fact be regulated, so it may be difficult to recover the additional cost.
6. Increased line congestion. There is a need for more long distance transmission lines, because of all of the energy trading. There is a great deal of NIMBYism, so approval for placement of new lines is very difficult to obtain. The result is fewer transmission lines than would be preferred, resulting in more and more line congestion.
7. No overall plan. There is a need for an overall plan for an improved system, but with so many players, and so much difficulty in assigning costs to players, very little happens.
8. Little incentive to add generating capacity. As long as there is a possibility of purchasing power elsewhere, there is little incentive to add productive capacity. Profits will be maximized by keeping the system running at as close to capacity as possible, whether or not this causes occasional blackouts.
