Category — Public Utility Regulation/Open Access
Traditional public-utility regulation of interstate transmission of both natural gas and electricity has given way to the open-access era. Rather than a bundled product (transportation and the commodity) delivered at one price, the utility just charges for transmission. Third parties (independent marketers) buy and sell the “unbundled” (gas or electricity) commodity.
Is third-party access (TPA) a step toward free markets compared to what came before? Some say “yes” given that there is a new market with the commodity where, as if led by an invisible hand, a plethora of new pricing terms and services have emerged. This is what led Ken Lay to think of open-access-dependent Enron as a pro-market, pro-competition company. “I believe in God, and I believe in free markets,” he used to say. But Enron was just the opposite, one of the most rent-seeking firms in the history of capitalism.
Most in the free-market community have misgivings about the half-slave, half-free regime for two reasons. First, transmission is still price-regulated on cost-of-service ratemaking principles. And second: new regulation–mandatory open-access–requires asset owners to provide “nondiscriminatory” transportation at “just and reasonable” rates. Certainly the restructuring is not the free market because the vital link of midstream services is regulated–and more so than before. [Read more →]
October 2, 2012 1 Comment