Matthew Bandyk states that "Competition is the lifeblood of entrepreneurs" and that " "deregulated" … brings to mind a playing field where business people are free to act as they want".
What about consumers? Isn't the true purpose of competition to restrain competitors for the ultimate benefit of consumers?
Doesn't an effective free market require freedom for customers to act as they want? Of course it does.
This is why utility deregulation is a fraud on consumers and is doomed to failure. Its promoters fraudulently promised it would drive prices down. Because of the lack of customer choice it has only enabled price manipulation and sky-rocketing prices.
A free market works only when consumers have sufficient choice to restrain business from manipulating prices.
For example, car companies can't manipulate car prices too high because if they do, customers will stop buying new cars and instead continue to use their old cars or buy a used car.
Electricity consumers do not have these choices. You can't re-use old electricity and you can't buy used electricity. If a utility unreasonably inflates electricity prices, you have no choice but to pay that price every time you turn on a switch.
The only way to fairly restrain electric utilities in the absence of such customer choice is to strictly regulate prices. This is what we did successfully for 70 years. Prices were reasonably related to the cost of production and supply generally kept up with demand.
Your free market analysis is distorted when you ignore or forget the customer side of the market.
Joel Carter
of IL
@
Jul 28, 2008 22:20:16 PM
California Markets
Ironically, the term "deregulated" is a misnomer more than most people understand. California didn't remove regulation from anything. The regulations including where energy could be purchased, how it could be priced, and how much could be purchased with hedges (foward contracts) became a point of law, not of markets. A Democrat controlled legislature decided that the laws of supply and demand could be repealed and what happened was disaster. The result is that California now has almost the highest cost of electricity in the nation with a relatively benign climate; a significant amount of hydro and nuclear; and a very regulated environment. If we compare the problem of providing electricity in California to Arizona, Nevada, or New Mexico, California should be the cheapest place to buy electricty. In fact, it is the third highest in the 11 western states, behind Alaska and Hawaii that both have very hostile climates for electricty (huricanes and snowstorms). It costs 19.9% more to buy electricity in California than the average of the 11 western states. Where are the cost-savings to ratepayers in this scenario? (The answer is nowhere.)
Matt Bandyk, a reporter for U.S. News, explores capitalism from where it all begins, with the entrepreneur, whose risk taking and experimentation provide the roots from which the rest of the economy grows. As much courage as it takes to create one's own business, even the entrepreneur needs some help, and this blog will look at news, trends, and practical advice for starting and running a small business.
Joel Carter of IL @ Jul 28, 2008 22:20:16 PM
Alan Gartner of CA @ Jul 25, 2008 18:16:40 PM
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