An Industry Trapped by a Theory

[MaverickX]

Deregulation has failed on all these grounds. Yet it has few critics. Evidently, even calamities like the Enron scandal and now the most serious blackout in American history are not enough to shake faith in the theory.

Ten years ago, most public utilities were regulated monopolies. They were guaranteed a fair rate of return, based on their capital investment and costs. So the government compensated them for building spare generating capacity and maintaining transmission lines. Regulators, of course, sometimes made mistakes and the industry oversold technologies like nuclear power. Even so, in the half-century before deregulation, productivity in the electric power industry increased at about triple the rate of the economy as a whole.



http://www.nytimes.com/2003/08/16/opinion/16KUTT.html

[PunkinPi]

1. Deregulation IS a bad idea. Thanks for positing this.

Not to get off the topic, but this article clearly states why CA is experiencing this enormous debt:

SNIP < But deregulation hasn't worked, for three basic reasons. First, there is a fairly fixed demand for electricity and generating capacity is tight, so companies that produce it enjoy a good deal of power to manipulate prices. The Enron scandal, which soaked Californians for tens of billions of dollars, was only the most extreme example. California authorities calculated that a generating company needed to control just 3 percent of the state's supply to set a monopoly price.
> SNIP

I just wish Gray Davis and Bustamante would drill this into the people's heads who are calling for this recall. Why don't people get it?

[bodhisattava]

2. The only other theory that comes close is Supply Side

Economics.

[vixengrl]

3. Wait...like, public utilities were, public...and utilitarian and

they worked?

Forgive me. In Pennsylvania we have "energy choice". We used to have Philadelphia Electric in the Philadelphia area, and the guys who were linemen for PE were treated a little differently than they are now. Like any other deregulation scheme, it means both workers and consumers have a greater need to double-check that their interests are protected. Deregulation ensures no protection, only competition. Of a kind few can afford, when it leads to interrupted service. But we in this area weren't affected by the blackout, curiously enough. Except my block, for forty minutes.