Free the Electricity Producers

Centralized government planning never works. It’s true of the economy in general, and it’s true of specific industries, such as electricity. Though Texas reduced regulations pertaining to the electric industry in 1998, the industry remains heavily regulated.

Chronicle business writer Chris Tomlinson notes that Public Utility Commission (PUC) regulations are causing problems for the industry. Deregulation has provided Texans with some of the lowest electricity prices in the world. But when combined with PUC regulations, electric generators have little incentive to build new power plants.

NRG CEO Mauricio Gutierrez says that regulators keep adding transmission lines, which brings more power into the grid. As a result, producers are often selling electricity at a loss. He added that,

Unless regulators redesign the wholesale market to eliminate these distortions, generators will shut down more coal and natural gas plants, make Texans more dependent on renewable energy and endanger the grid’s reliability.

Gutierrez fails to realize that centralized planning is not the solution–it is the problem. Regulators are imposing one set of policies and procedures upon the entire industry. When those policies don’t work, the entire industry is negatively affected.

In a free market, businesses and entrepreneurs develop a myriad of solutions to a problem. They aren’t forced to abide by the dictates of the planners. Instead, they offer alternatives, and if one doesn’t work well or satisfy the needs of consumers, other options are available. This is true in cell phones, computers, grocery stores, and automobiles. It is true of every product or service when producers are free to act on their own judgment. It would be true of electricity, but only if we abolish centralized planning.

Many argue that electricity is a “natural monopoly,” that we can’t have a free market in electricity. This argument was used for more than seven decades as justification for the AT&T government protected monopoly. When the government’s protection was removed, innovation exploded. The same would happen in electricity, but only if we free the producers from the dictates of centralized planners.

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