Out of masterresource
By Robert Bradley Jr.
“A free market in electricity would override the current provisions of landmark federal laws, such as the Power Act of 1935, the Public Utility Holding Company Act of 1935, the Public Utility Regulatory Policies Act of 1978, the Energy Policy Act of 1992, and the Energy Policy Act of 1995 and Inflation Reduction Act of 2022.”
My new AIER primer defines and applies the classic liberal free market worldview to electricity. This is particularly important because this common sense perspective has been both forgotten and misapplied.
Forgotten amid criticism of traditional public utility regulation that emerged in the 1960s; misapplied in light of the current era of mandatory open access, which involves centralized planning at the wholesale level with ISOs/RTOs.
My main points regarding quotes are:
1. Electricity is a free market product with a clear free market, classical liberal meaning: the separation of government and electricity at all stages and as a whole.
“A free electricity market is defined as the absence of government ownership, control or regulation. Electricity and government are separate, except for legal protection from violence or fraud. The government neutrally safeguards the enforceability of private contracts and other legal market norms.”
“…contrary to government direction and control, from municipal ownership to franchise protection and cost-based rate caps (regulation of public utilities); to mandatory open access for outsiders (free takeover); to the need for renewable energies (the forced energy substitution of wind and solar).”
“Grid power has never been viewed as a shared resource that conflicts with definable private property rights and efficient operations. The “commons” theory of government organization only emerged with government-mandated open access broadcasting, which itself is a clear violation of private property rights.”
2. Although electricity has unique characteristics, it is subject to market forces and does not require government intervention or ownership. Empirically, the US energy sector has a clear free market history – and there is no demonstrable market failure.
“The unique nature of electricity required highly coordinated multi-phase operation, as seen in oil and gas (in a free market). There was no need for federal franchise protection.”
“The market era was characterized by falling rates, increasing usage and reliable service…” Market-driven integrated operations resulted in unprecedented affordability and continuous, coordinated service.”
3. Electricity is now the second most regulated sector of the U.S. economy after money and banking (outside of the military-industrial complex). It is an unholy mix of public utility regulation; government-enabled diluted, intermittent wind and solar power; and mandatory open access.
“Today, more and more regions are affected by rising electricity tariffs, energy conservation objections and service interruptions.”
4. Mandatory open access has brought its own problems under de facto socialism, particularly reliability pricing.
“Economic calculations have weighed on ISO/RTOs…” Some regions have implemented “capacity fees” to reward generators for their standby capacity. Others have bet on “energy-only” prices, betting that periodic price drops would create enough capacity.”
“Consumer welfare and the 'duty to provide service' have been lost in the transition to central planning and in the government's drive to decarbonise. Worse, agency errors…were protected by sovereign immunity.”
5. Future public policy begins with federal deregulation of the electricity industry (state deregulation would have to follow).
“A free market in electricity would override the current provisions of landmark federal laws, such as the Power Act of 1935, the Public Utility Holding Company Act of 1935, the Public Utility Regulatory Policies Act of 1978, the Energy Policy Act of 1992, and the Energy Policy Act of 1995 and Inflation Reduction Act of 2022.”
“Competition could be direct competition with duplicate assets, or it could be a single company asserting a market over potential competitors. Either way, the private and public costs of government intervention could be avoided and market signals could be established.”
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