Category — Public Utility Regulation/Open Access
The familiar complaint of market failure by critics of decentralized (nongovernmental) decision-making must be coupled with realistic discussion about any government “solution.” This is why market failure must be considered alongside two other failures:
- Analytic failure, which can range anywhere from intellectual error to the fatal conceit to emotional bias, and
- Government failure, the gap between theory and practice, wishes and result.
Intellectuals, practitioners, regulators, and the public far too often resort to see-a-problem, pass-a-law rather than:
- Making sure what is seen as a problem is really negative;
- Making sure that the undesired situation did not result form prior government involvement in whole or part; and
- Assessing whether the (coercive) solution is greater than the problem, which would leave civil society (media, foundations, public opinion) to right the wrongs.
A century or more ago in the electricity market, state after state set up tribunals to set rates and establish terms of service. The regulated companies accepted self-regulation–in fact they lobbied and got regulation–in exchange for exclusive franchise rights.
The peculiarity and problems of addressing monopoly power with monopoly status is not the subject of this post. Rather, it is to let Jim Clarkson, libertarian voice of the beleaguered ratepayer in the Southeast, have his moment of calling and concern.
Free marketeers can either lobby or pray against the powers of government gone wrong. Less a lobbyist, Jim Clarkson is given the floor. [Read more →]
August 23, 2013 4 Comments
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