Posted 8:47 am Sunday, November 23, 2008
Let Markets Decide Future of Energy Cost
A new push is on to reregulate Texas' electricity markets, complete with studies, committee hearings and proposed legislation.
"Since Texas deregulated its retail electric markets in 1999, Texans have suffered some of the steepest price increases in the nation. Instead of paying rates below the national average -- as was the case for years -- Texans now pay above average rates," claims a new study by an interest group called Cities Aggregation Power Project (CAPP). "Consumers are hurting. Lawmakers should take a long, hard look at these findings and consider how best to provide relief for their constituents."
But a closer look at the facts shows that deregulation is working -- and if anything, legislators should further reduce regulations, not go back to a market-twisting model of government intervention.
"When people are attacking deregulation, they're not saying the markets have failed; they're saying the people have failed to make good decisions, using the markets, and therefore government needs to step in and overrule the peoples' decisions," Bill Peacock of the Texas Public Policy Foundation said at a recent conference.
It's true that electricity prices in Texas spiked in recent years - but that's largely because natural gas is used to produce about half of the state's electricity, and natural gas prices have been volatile. And as those prices have dropped of late, so have electricity prices.
Professor Robert Michaels of California State University at Fullerton compared Texas' electricity market to California's -- noting California's efforts to quash competition and mandate "renewable" energy production at the same time.
"Texas went the other way," Michaels explained. "Texas said we'll let people have choices. And as a result you have a well-functioning system. Even after the problems you had with fuel prices earlier this year, the markets recovered because that's what markets do. In other words, in Texas, the markets provide for the future. The system California has won't. It provides for politics."
But there are steps the Legislature can take to ensure the reliability and cost-effectiveness of the state's power grid, the experts add.
First, the state can eliminate the requirement that 50 percent of new power generation comes from natural gas. And lawmakers can eliminate mandates that certain percentages of power generation come from renewable sources, such as wind and solar. Let the markets decide, and thereby diversify.
"We have coal-fired plants producing very efficiently," noted Wisconsin State Assembly Rep. Phil Montgomery. "And we're working toward even cleaner coal-fired plants and nuclear plants, with basically no emissions. But (special interest groups) are fighting tooth and nail. They seem to want a windmill in every back yard."
But those technologies are largely unproven, "massive gambles," Michaels said.
"No one knows what the future is going to be like," he said. "That's why I want the markets to decide."
