Thursday, June 25, 2009

Electric "Deregulation" Double-Speak

It's June in Houston, and it's hot. Which means, it's time for State Rep. Sylvester Turner to issue his annual call for the state utility commission to prohibit any utility from shutting off power to a customer who doesn't pay his bill. While most utilities have voluntarily programs that they institute during the summer, this isn't good enough for Turner:
What we don’t need to see happen is we don’t need to have news stories of seniors or critical care customers who are in the hospital or dying because of the heat and then we decide to step in and do something.

But what we do need to see, according to Turner, is government coercion used against power companies. What we do need to see is a business forced to provide service to those who cannot pay for it.

Lest I sound like some kind of ogre, I spent two weeks after Hurricane Ike without electricity. So I have some idea of what it is like to be without air conditioning--it is not pleasant. Granted, the weather was somewhat cooperative and I did have a generator, but these provided only partial relief.

Turner has long been an advocate of using coercion against utilities for the alleged benefit of low-income citizens. He is certainly not alone in that regard. In 2007 Mayor Bill White appeared at a town hall meeting with Turner. White--like most politicians of his ilk--distorted the facts for political purposes:
They say there is competition. But there is not. That's a rip-off. You cannot have a situation where there are really two major monopolies and nobody regulates them without someone ripping you off.

White would like us to believe that "deregulation" is the same thing as an absence of regulation. He would like us to believe that a loosening of controls is the same thing as the removal of controls. The fact is, despite "deregulation" utility companies in Texas remain regulated. Consider this statement from the web site of the Texas Public Utilities Commission:
We are responsible for regulating certain services provided by telephone and electric utilities in Texas and for protecting utility customers.

I agree with White that a rip-off is occurring. But who is the victim? Who is the perpetrator? And if a monopoly does exist, what is the nature of that monopoly and how did the utilities achieve that status?

White and Turner would have us believe that consumers are the victims of the "unregulated" utilities, despite the fact that utilities are regulated. They would have us believe that politicians of their sort are truly concerned about the welfare of consumers. They would have us believe that government intervention can solve the problems created by government intervention.

Coercive monopolies cannot exist without government intervention--only government can prohibit entry into an industry. As Ayn Rand wrote:

Every coercive monopoly was created by government intervention into the economy: by special privileges, such as franchises or subsidies, which closed the entry of competitors into a given field, by legislative action.

If power companies are a monopoly, it is because of government intervention. (For an excellent expose on the history of utilities, see Raymond Niles' article in The Objective Standard.) Despite the platitudes of White and Turner, it is government intervention that gives utilities their monopoly status. And government intervention continues to plague the industry, regardless of claims to the contrary.

If White and Turner are truly concerned about the plight of low-income citizens, then they would not misrepresent the state of the industry. They would not make claims that are blatantly false. They would not ignore their own role in driving up the cost of electricity.

The solution--as in every industry--is not more government regulations and controls. The solution is to recognize the rights of electricity providers to use their property as they choose. The solution is to truly deregulate--to remove all restrictions on the provision of electricity.


Anonymous said...

You make suggestions that Rep. Turner and Mayor White should not "make claims that are blatantly false", well sir I suggest you heed your own advice. You claim most companies have voluntary programs, according to the Texas Department of Housing and Community Affairs there are only two companies currently offering these voluntary programs.

Brian Phillips said...

If your claim is true--you provided no link--then I stand corrected. But whether it is most, or many, or none does not change my point. The government should not be using force against the utilities, and the claims made by Turner and White are false.

John Coby said...

Regardless, electricity deregulation has been a complete failure. Senator Eliffe in East Texas passed a bill that stopped East Texas from fully deregulating electricity. Even he knows it was a complete failure.

The lowest rates you can find, if you have the time and the timing of the market is about 10.7 cents per kWh, about 35% higher than pre-deregulation rates.

For those who just stayed with reliant, they are probably on a month to month basis, and paying out their wazzoo during the summer and about 10 cents in the winter, again 25% higher than pre-deregulation rates.

Brian Phillips said...


I think you are missing my point.

"Deregulation" implies the removal of regulations and controls, but this is not what happened with the utilities. The Legislature relaxed some controls, but retained others. So long as any controls exist, the market cannot operate properly or freely.

To blame higher prices on "deregulation" implies that the market doesn't work, when in fact it is the controls and regulations that don't work. Government intervention is the cause of higher utility rates.