Free the Energy Producers

In its never ending quest to expand government power, the Chronicle calls for Texas legislators to re-regulate the state’s electricity providers. Electrical deregulation, the paper tells us, has not been economically beneficial to consumers:

Light bills in areas such as Austin and San Antonio, where service continues to be regulated, are lower. In deregulated areas (that’s most of us, Houstonians), they’re higher.

How much higher? We’re not talking a difference that can be measured in pennies. According to the consumer group Texas Coalition for Affordable Power, ratepayers in deregulated areas have coughed up $22 billion more than those in regulated service areas over the past decade.

On the surface, this might seem to be a strong argument in favor of the Chronicle’s position. If deregulation was intended to benefit consumers, and it hasn’t done so, then it would seem plausible to re-regulate the industry. But as is often the case when a political agenda is involved, the paper conveniently ignores facts that challenge its conclusion.

The advocates of re-regulation would have us believe that deregulation means an absence of regulations—a completely free marketplace. But this is simply not the case. A reduction in regulations means just that—a reduction—not the removal of regulations. Despite what the Chronicle would have us believe, the electricity industry in Texas remains heavily regulated.

Consider this statement from the website of the Public Utility Commission of Texas (PUC):

The Public Utility Commission of Texas regulates the state’s electric and telecommunication utilities, implements respective legislation, and offers customer assistance in resolving consumer complaints.

The regulations imposed by the PUC cover virtually every aspect of the industry, from the format of bills to the disconnection of service. The Electric Substantive Rules has more than 150 subchapters, and contain 710 pages. Such detailed control of the industry hardly constitutes an absence of regulations.

As is almost always the case in a mixed economy—an economy with a mixture of controls and freedom—the Chronicle blames freedom for higher electricity rates. But freedom does not exist in the Texas electricity market.

Technology companies are among the freest in the country, and they routinely and consistently amaze and delight us with their products. Computers, cell phones, and flat screen televisions have improved in quality and decreased in price. Freedom has allowed technology companies to develop new products without begging for government permission at every step of the way. The same would occur in the electricity market if energy companies were free.

As an example of what is possible in energy, consider what happened to the price of kerosene when energy producers were free. In 1865, when kerosene became the primary energy source for indoor lighting, the price was fifty-eight cents per gallon. Nine years later, the price had decreased 83 percent to ten cents per gallon. Compare that to the 100 percent increase in energy prices Americans experienced between 2001 and 2010.

If the Chronicle truly desires lower electricity rates for consumers, it would advocate for the removal of all regulations on the industry. It would call for a marketplace in which energy companies could innovate and compete without continually seeking government approval. Abundant, inexpensive energy will only result from freeing producers.

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