Thursday, March 5, 2009

A Free Market Fallacy

Loren Steffy correctly identifies the fact that Texas does not have a free market in electricity, despite "deregulation". Writing about the recent purchase of Reliant's retail energy business by NRG, Steffy writes:

NRGiant could use this newfound synergy to subsidize the retail business with its generating profits and offer significantly lower rates to customers, but the rules of deregulation won’t allow it. The Public Utility Commission’s code of conduct prevents that sort of integration.

In other words, PUC regulation is the only thing that will preserve competition among retailers.

We are left with a market that looks as if Picasso drew it: Competition has brought higher prices maintained by regulation all wrapped in the increasingly misleading label of the free market.

Alleged claims of "deregulation" of electricity in Texas are at best misleading--the market is still regulated by the PUC. A market that is regulated is certainly not unregulated, and this is the implication of those who attack deregulation.

Enemies of freedom love to point to "deregulation" to make a "case" for more government controls. The "deregulation" loosened the shackles slightly, while tightening others, and when producers struggle to operate under the myriad interventions and controls, we hear a chorus that "freedom has failed" or "deregulation is not the panacea that was promised". We have heard this repeatedly in regard to the financial markets.

Certainly, reducing regulations is a good thing. But what has happened in the Texas electricity market is akin to taking the shackles off the producer's arms and putting them on their legs. Regulations prohibit energy producers from acting on their own judgment and using their property as they deem best.

If I were Mayor, I would use the office as a bully pulpit to make points such as this. I would not appear in ads touting Houstonians' freedom to choose an electric company (as Mayor White does). Instead, I would point out the fraud being perpetrated on Houstonians and all Texans. I would point out that as long as the PUC has any voice in the rates charged or any other aspect of electricity services, the market remains regulated and energy producers are not free.

Indeed, as Mayor I would demand that Austin (and Washington) repeal every law that violates the rights of individuals. One cannot fight for individual rights without fighting for the rights of all individuals. While the primary responsibility of the Mayor of Houston is to protect the rights of Houstonians, this cannot be done without addressing the violations of those rights perpetrated by Austin and Washington.

Politicians in Austin and Washington are eager to expand their control over the economy and our lives. The same is true of politicians in Houston. But they can be stopped. We can challenge them on moral grounds. They cannot provide moral justification for their proposals. We can.

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