The Commonwealth Iconoclast

A site dedicated to covering issues relevant to the Commonwealth of Virginia, and nation at large, plus other interesting things too, as I see fit...

Wednesday, May 31, 2006

Electricity Deregulation... What a shock!!!


Delegate Clarke N. Hogan Rocking the Boat

Good questions concerning Electricity Deregulation

Virginia… Don’t get shocked!


I know; I know… Gas prices keep going higher and it is a horrible problem…especially for us folks who still insist on driving the behemoth SUVs because “they are safer…blah, blah… and etc. and etc…”

I just need basic transportation so give me a break, please!

My wheels? None of your business!!!








Maybe gas prices are a concern and maybe I do feel a little bit sorry for us Americans even though we may have fallen a little short in the development of a workable comprehensive national energy policy.

But whether we know it or not, we are facing another aspect of the “energy crisis” much closer to home… in fact, in our homes and in our businesses, and practically everywhere else we go where we would like to have lights to see what we are doing.

The crisis is with electricity deregulation.

Electricity deregulation gets some passing media attention but not nearly as much as does the problem with crude oil supplies and pricing.

Maybe it is because the crude oil problem seems to be so tied up with the Middle East, the Muslim world, and the war on terror and all that mess. Or maybe it is because we Americans love our cars so much and are forced to return to the gas pumps every few days to get a new fix of that precious juice that makes are cars purr and go VROOM…VROOM!

Whatever...

So, it was good to see that this under-covered story about electricity deregulation got some well deserved attention in the recent article in the Richmond Times Dispatch entitled “Deregulation skeptic joins panel.”

It is especially interesting since the article focused on the recent appointment of Delegate Clarke N. Hogan to the General Assembly’s commission overseeing electricity deregulation and his early shots across the bow of the commission in challenge to the “conventional wisdom” and the standard “party line.”

This is the same Clark N. Hogan who was the subject of the Iconoclast article on the General Assembly budget fiasco and Delegate Hogan’s quaint “don’t worry; be happy” philosophy on the budget.

But this time, Delegate Hogan is showing some welcome gumption! He is challenging the General Assembly’s commission and questioning their assumptions. He is suggesting that the commission itself may be a “hindrance to meaningful deregulation and energy policy” and doesn’t believe the popular notion that the Virginia deregulation plan is or will be different from the plans in other states that produced drastic rate increases for consumers.

This is not to say that Delegate Hogan has all the answers or that he will single handedly solve this issue of electricity deregulation. But it is refreshing to see that he is taking this issue seriously and giving it some long overdue media focus.

Electricity deregulation is an important issue! It is a big issue! It is a complicated issue!

The Iconoclast is not going to pretend to have any kind of profound insight on the subject. But, looking at it from a practical perspective, we can say unequivocally that electricity deregulation is at least as big an issue as is the availability and pricing of crude oil.

We need to pay attention to this issue!

The fact is, the U.S. economy, indeed the world economy, is energy driven. Without energy, in all its many forms, economic activity nation-wide and world wide would come to a grinding halt. Electricity is a practical form of energy that can be produced by many methods including solar, hydro, nuclear, tidal, wind, and fossil fuel technologies. Electricity is, in fact, indispensible to the world economy.

When you stop to think about it for minute, electricity is really great stuff … it can be produced many ways and almost anywhere and then shot through transmission lines at high voltage for thousands of miles to local distribution systems and then to my house down a gravel road on the side of the mountain to power my sound system so I can listen to my tunes. It is also cool for powering my fridge to keep my beer cold. See more discussion on electricity.

But, I digress… We should not trivialize the importance of electric power in the big picture of our world.

The electric power industry is a $220 billion dollar industry in the U.S. alone and has been characterized as the “last great government-sanctioned monopoly” in America. Deregulation of the electric power industry is going to happen sooner or later for several compelling reasons.

First, this is the United States of America. Americans hate monopolies!

Second, the American capitalistic system is based on free competition with little or no interference by anyone… especially governmental interference.

Third, and most importantly, there is money to be made! Yes... money to be made!!!

The proponents of deregulating the electrical power industry argue that monopolies are bad, even government regulated monopolies (or should we say especially government regulated monopolies). They argue that free competition is good for the consumer… always. (Never question this premise.)

This looks good on paper and you can bet the $50 million dollars spent by lobbyist on “wining and dining” our legislators to explain the benefits of electricity deregulation doesn’t hurt the case.

So far a credible case for the success of electricity deregulation has been made in Pennsylvania with a report of $10 per month savings for some consumers in the Philadelphia region. Mmmm... some consumers? I wonder about the others...

However, there seems to be little or no consensus on exactly what plan of deregulation works. Furthermore the results in several states including California, Maryland and Delaware, has been down right painful and expensive for consumers. California consumers faced doubled electric bills. Maryland and Delaware consumers faced 60 percent and 118 percent increases respectively.

I feel their pain!

Bottom line… the deregulation of the electric power industry is seemingly inevitable, and may or may not be good for consumers, depending on specific circumstances and the policies put in place by the various state legislatures.

There will be winners and losers. The big threat seems to be to the small consumers, homeowners, small businesses, rural areas, suburban areas, farmers, and others who command little respect in the market place. The big electric power consumers can afford lobbyists and can squeeze their legislators and the power companies. They will do ok.

You can bet that big business will always make a profit... kind of like the Enron fantasy... Makes you kind of wonder, doesn't it?

Little people…be afraid… be very afraid…. Your government is working. (I know, I already used that one before, but really, you should be afraid.)

Delegate Clark Hogan is right to ask questions and to rock the boat on electricity deregulation in Virginia. This is a serious issue and serious questions need to be asked. The Iconoclast commends him for his efforts on this one.

Please… let us not get shocked by electric deregulation in Virginia.

4 Comments:

  • At 6/01/2006 11:58 AM, Blogger nova_middle_man said…

    This is indeed a complicated issue. Our friends in Maryland are going to be hit with a 40-80% increase in the coming months. I think the moral is proceed with caution.

     
  • At 6/01/2006 12:32 PM, Anonymous Anonymous said…

    Will:

    You fail to draw a distinction between the cost of the electricity and the cost of transmitting and delivering it. T&D is really all that has been purely regulated or 10 or more years. Electricity has been sold on wholesale spot markets by deregulated, independent power producers for more than a decade, although the regulated utilities also generate power.

    All that is being deregulated is the RETAIL cost of the electricity, which generally is comprised of the cost of the fuel, the cost of running the plant (labor, maintenance, etc) and paying the mortgage on the plant investment.

    Any increase in electricity cost is generally a direct correlation to the underlying cost of the fuel - coal, gas, oil, neutrons, whatever.

    Whatever perceived comfort that consumers get from regulated retail rates, in the long run they still pay for the fuel cost, dollar for dollar. Regulation may ease out the spikes (maybe) but it also eases out the valleys.

    And no, I don't work for the power company.

     
  • At 6/01/2006 3:07 PM, Blogger Will Vaught said…

    The writer of the preceding comment offers helpful clarification on this complex issue. Thanks.

    As stated in the original post, electricity deregulation is going to happen sooner or later. The only question is in what form in the various states. Some states seem to have handled the matter better than others. Hopefully the Virginia approach will one of the "success stories" instead of one of the "horror stories."

    The writer is correct to point out that real costs must be passed on to consumers for the system to work. With or without deregulation, the costs paid by the consumer will undoubtedly go up over time as does everything else. There is no such thing as a free lunch. The key is to have a plan that is "fair and reasonable" for all competing interests. That is where the difficulty lies.

    The devil is always in the details.

    Thanks again

     
  • At 6/03/2006 1:31 PM, Anonymous Anonymous said…

    The term "deregulation" may be misleading. Between the two extremes of complete governmental control of everything and complete lawlessness, there is probably some approprate middleground where the government exercises effective oversight to protect the public interests from greed, corruption, and abuse.

    Some of us remember how the government "deregulated" the Savings and Loan industry a few years back and the resulting disaster. Politicians bowing to lobbyists for the industry were saying "let the S&L industry do what it does best free of government interference."

    Pretty soon, the S&L industry was destroyed by a culture of corruption. So what that the crooks were wearing suits; they were still crooks driven by the lure of fast and easy money, and smug in the knowledge that the government wasn't watching.

    I am not saying that electric deregulation is just like the S&L deregulation, but we do need reasonable governmental oversight of the electricity industry to protect the public interest against the temptations of greed.

     

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