I was always vaguely against Electric Deregulation because I thought that is was not a fair representation of the Free Market. In the Free Market, demand and supply are supposed to control price. When there is a greater supply than there is demand, prices drop. When there is a greater demand than supply, prices increase. The leveler of price is supposed to be competition between businesses to provide a better service or a lower price.
In the electric market this isn't going to happen though. Demand for electricity, especially during peak daytime hours, has exceeded supply in many parts of the country for a long time and probably will for the foreseeable future. This means very simply that prices will increase once rate caps are removed and they probably won't come down anytime soon. This has been the case in every state where deregulation has occurred.
Could there be an upside to this though? It occurred to me the other day that there may indeed be the potential for a very big upside as long as certain things remain in place after deregulation.
Many states have allowed customers to choose their electric service provider for some time now, Pennsylvania being one of them. You could choose from either your main (usually fossil fuel or nuke powered) provider or others such as wind energy companies. The only downside to it was that such renewable energy companies rates were nearly always higher, sometimes significantly higher than rates for electricity from fossil fuel plants.
This has been an obvious disincentive for consumers to purchase power from alternative energy sources except for those who were more concerned about the environment than price. For average Americans though price is the determining factor when choosing a product. The Department of Energy has a map which you can mouse over to see the status of deregulation in your state HERE.
The upside of deregulation can be that prices for electricity after deregulation will be determined by the market and not individual producers' costs. This will mean that electricity produced by wind or solar or biomass plants will cost the same as electricity produced from coal or nuclear plants. Then the price disincentive for consumers to choose a renewable energy supplier will be removed allowing consumers to choose with their conscience not their pocketbook.
I believe that in this situation most customers will choose to have their electricity provided by environmentally friendly energy sources. With this in mind it seems as though the environmental movement now has at their disposal the perfect vehicle by which to achieve their goals of creating a renewable energy economy in the United States. If enough customers sign on to buy renewable energy then someone will have to build the generating capacity in renewables to meet that demand.
Whether it is the existing utilities or start-up providers who build the capacity doesn't really matter in the end. What matters is that the job gets done. As deregulation progresses, it will be up to the public to manage the process and to ensure that electric choice remains an integral part of it so that the choice as to our future really does get to be made by the People.Powered by Sidelines