Electricity Policy in Debate: Classical Liberalism on Trial

Rob Bradley Regulation started after a rapid period of growth before WW I. It was innovative, developed a meter (WRight) that measured flow and daily max, and two part prices for energy with a charge for capacity based on Max. As per typical new industry, profits eroded, and Sam Insull travelled the nation arguing that this would be a disaster proposing rate of return regulation; the Illinois legislature caved and a succession

Of states followed.

Beware business persons bearing the gift of regulation.

I have favored deregulation since I first became involved 40 years ago.

But there is no such thing as a grid that could withstand severe-enough weather. Even if you had batteries everywhere, long enough challenge and they could not be recharged. Wind is of course a really costly and unstable source of energy and was forced on by an uninformed populist movement.

Methinks you do protest to much, and are being ignored. So lay off in you self-interest.

Your arrack on Lynne and me is inaccurate and uninformed.

Thank you for engaging. I believe that you and Lynne are on the wrong path and need to rethink electricity markets and regulation from the ground up (and your historical review above on Insull is incorrect in some essentials to get you off on the wrong foot). I would welcome your full-scale rebuttal to my EconLib article above. I hope you take criticism well–because 1) under classical liberal principles, mandatory open access is a violation of property rights–and 2) central planning failed miserably with PUCT/ERCOT. Finally, I find this statement very peculiar, impolite, threatening (?), and quite unbecoming of a scholar: “Methinks you do protest to much, and are being ignored. So lay off in you self-interest. Your arrack on Lynne and me is inaccurate and uninformed.”

Jess Totten’s chapter in the TX book that Andy Kleit and I edited performs the correct counterfactual analysis: how do post-restructuring retail rates compare to what retail rates would have been in the absence of restructuring? His analysis finds that restructured rates were lower. A more recent analysis from economists at Rice University finds similar results. There’s very little good analysis that supports the claim that retail prices are higher than regulated rates would have been.

I believe the retail savings claim is errant because low rates for Texas ratepayers 1) was paid for in part by national taxpayers and 2) did not factor in the artificially low prices from wind (negative prices even) that ruined reliability and caused the recent price spike that eviscerated the prior savings. This gets to the unseen and the long run–simple Henry Hazlitt. (And I assume the CREZ surcharge was included in the analysis.)