Competition and consolidation will continue to drive the US electricity market in 1999 as states step up moves to open more of the electricity market to competition, and power companies rush to fill that market need.

In a report commissioned by the New York Mercantile Exchange, analysts expect 1999 to be a year of utility mergers in the Midwest. It has been suggested that Cinergy and LG&E, and AEP and Central and South West might merge.

In the south, Duke Energy and Southern are looking for acquisitions outside their territory, as well as leading the trend in acquisitions of oil and gas production.

Power markets in the north east will change radically. Customers in Massachusetts, Rhode Island and New York can choose their own suppliers, and these markets will become more active. Pennsylvania and New Jersey are likely to join their ranks.

Other regions are slow to embrace deregulation. A deregulation effort failed in Michigan, with the legislature killing a bill to deregulate by 2002. State officials claim that they will comply with orders from state regulators to phase in competition by that year.

In Ohio, deregulation efforts failed when time run out, with legislators unable to agree. In Indiana, West Virginia and Kentucky, legislators will continue to study deregulation.

A consortium of states in the south asked Congress that they be left alone with regard to power deregulation. Georgia is probably in the lead of southern states, and is at least two years away from deregulation.

In the south west, the creation of an Independent System Operator (ISO) will move closer in 1999. The ISO will oversee pricing of and access to transmission lines by companies in Oklahoma, Kansas, Louisiana, Arkansas, Missouri, New Mexico, Mississippi, and Texas.

Experts predict that higher prices in the Midwest in 1999 may arise as a result of a possible combination of poor weather, nuclear outages and transmission congestion. Congested transmission lines are expected to be a major issue in Minnesota, Iowa, Nebraska, North and South Dakota, Wisconsin and Montana.