A little re-regulation

Electric deregulation was born in Congress and lovingly embraced by the states, based upon the promise of cutthroat competition and cut-rate prices. Through still in its infancy, this free market approach to an essential of civilization already is making mischief.

It’s a problem of demand and supply. The roaring economy, the mass migration to the air-conditioned Sun Belt and other consumption boosters have pushed demand to all- time highs. But the other side of the equation has not kept up – experts have warned from the start that the electric industry was more concerned with mergers, acquisitions and divestitures than it was with ensuring an adequate supply. With that came conjecture that perhaps a light touch by the heavy hand of government might be in order.

California, always the trendsetter, has taken the first steps toward modest re-egulation. San Diego is in open revolt over soaring electricity prices. It is no exaggeration that many residents have to choose between paying power bills and buying groceries. Community leaders are mounting a campaign for the mass underpayment of those bills. With accusations of price gouging by suppliers mounting, state regulators used the only tool de-regulation left them and slashed by half the maximum allowable price for wholesale megawatts. With rolling blackouts common across the nation, expect more of the same elsewhere.

Say this for the old regulated system; at least the lights stayed on. In exchange for the monopolies they enjoyed, utilities had to make adequate investments in power plants to cover peaks in demand to accommodate growth.

And people could afford to leave them on. The regulated prices provided a reasonable profit for the owners and attractive dividends for the shareholders. The obvious flaws of reliable supply, affordable prices and decent return on investment made deregulation necessary.

True, the largest industrial consumers of power are banding together and seeing discounts and there are new power plants being built, especially those that burn natural gas. But the individual consumer isn’t welcome in the discount price club and in many states, new plants and transmission lines are running into objections – and litigation – from those who don’t want the stuff in their backyards, or the next county.

The solution needn’t be a complete tottering back to full regulation, but governments will have to become bolder in permitting new plants and lines. Even harder, but even more necessary, is the imposing of efficiency standards for power gobbling appliances, something appliances makers find terribly offensive. And the aspect of de- regulation that rewards the highest consumers with the lowest prices must somehow be tempered with some efficiency component.

Congress was warned in advance of all these problems by opponents of de-regulation. Now Congress must fix them. Luckily, it shouldn’t take long. When California throws a tantrum, politicians tend to hear it.