CBS Hints at More Regulation for the Power Industry
The CBS âEvening Newsâ recently hinted that more regulation, not less, is needed to improve the nationâs electrical grid.
Reporter Trish Reganâs August 3 story displayed a chart showing an increase in the number of blackouts in the past few years. Regan then complained that after years of gradual price increases, many major electrical utilities are now increasing rates dramatically, including a 72-percent rate hike by the BGE, the utility that supplies power to metropolitan Baltimore.
âThe industry defends its hikes, saying prices were artificially low for decades because of government regulation,â Regan said, introducing a sound bite from Bill Brier of the Edison Electric Institute, who blamed rate caps for holding down prices below inflation in many cases.
As rates go up and the power companies bring in more revenue, âthe utility companies say they plan to spend $17 billion a year over the next decade to make these improvements,â Regan noted.
âBut Trish, isnât that what they always say,â complained Schieffer, who suggested even more regulation was in order: âIs there any way they could be held to that?â he wondered.
Prompted by Schiefferâs question, Regan suggested the U.S. electrical industry needs âeconomic incentivesâ such as the fines that New Zealandâs government slaps on power companies who suffer power outages.
But while Regan saw a case for even more regulation of the power industry, she missed an opportunity to examine how regulatory experts argue that artificially low prices set by the government have harmed the consumer, such as in Maryland and California.
She could have talked to the Maryland Public Policy Instituteâs (MPPI) Thomas Firey. In a June 15 op-ed in the Baltimore Examiner, Firey blamed politicians aiming to keep voters happy with low energy prices for the electrical systemâs troubles.
Maryland lawmakers voted in 1999 for a flawed energy regulation bill âto guarantee low prices. But more competitive markets do not guarantee low prices â they only guarantee that prices more accurately reflect costs,â MPPIâs senior fellow noted.
âMarket signalsâ provided in deregulated prices âcan be painful, but they also provide the right incentives to suppliers, consumers and innovators. Thatâs preferable to when regulators have been required to protect monopoly utilitiesâ bottom lines in Maryland and other states,â Firey added.
âCalifornia has never experienced true energy deregulation. The âderegulationâ implemented in 1996 left price controls in place,â Summers noted, adding that as prices were capped âbelow market prices, California limited the profitability of the industry.â
In short, âthe price caps prevented energy producers from passing the increases on to consumers, resulting in the bankruptcy of PG&E and the near-insolvency of Edison.â