Even Cato Economists Say Energy Deregulation Does Not Work

:wow:

EDIT

nd the CATO economists drive their criticism further:

"Interestingly enough, the deregulators are trying to create a world that would probably never arise in a totally free electricity market. In a world of deregulated vertically integrated firms, both producers and consumers would almost certainly resist spot market relationships. During gluts, firms would not recover the cost of capital; and during shortages, electricity consumers would be vulnerable to economic extortion, as competitive entry and rivalry can't happen overnight. Both firms and consumers would likely prefer long-term contracts, an arrangement that meets consumers' interest in price protection and firms' interest in cost recovery. Accordingly, the equilibrium relationship between firms and consumers in a totally unregulated world might resemble that of the old regulatory regime, albeit an equilibrium achieved through contract. The only (unanswerable) question is how different the specifics of such hypothetical contracts would be from current regulatory practices."

As most participants in the industry know, most players, producers and consumers, small and large, crave stability and consistency. The industry is complex enough to manage as it is without having to worry on a constant basis about access to the grid, or access to fuels, or availability of the end product - thus long term contracts are the rule. End consumers want the certainty that they will have power when they turn the switch, and understandable (i.e. simple) prices. Producers want to be sure that prices over the long term will be sufficient to cover the investments they have to make upfront. They also want to ensure that they are able to respond to demand variations in a effective way, with the requisite technical coordination between producers and network managers on an ongoing and trustful basis.

Which means, as the CATO writers conclude, that in a really, really free market, players would end up with something that would look amazingly similar to a fully regulated market, based on long term contracts and smoothed out price formulas.

EDIT

http://www.eurotrib.com/story/2007/10/7/1080/70976

ANY Deregulation Does Not Work!

Freepturding is becoming an increasingly lonely enterprise. :evilgrin:

Guess they're finally coming around to grasping the nature of public utilities and "public goods."

Here's something on that point that I read a couple months ago:

What's the (libertarian) world coming to ?