To compete, or to protect a monopoly?
That is the question state governments must ask themselves when it comes to regulated electricity markets. Statists claim that, while markets are the most efficient means of allocating resources for all other sectors, they do not work when it comes to electricity production. Rent-seekers such as General Electric also love the complicated tangle of electricity regulation when it mandates utility companies to purchase products such as industrial wind turbines for which they control the market. (Ever notice who makes those television commercials praising wind power - a 12th Century technology - as the pinnacle of human achievement?)
However, states that have taken the initiative to unleash the power of competition in the electric utility industry have demonstrated that, even in this industry, competitive markets operate much more efficiently than government-protected monopolies. The Texas Public Policy Foundation has just released a new report showing that restructuring electricity markets so that providers are able to compete for retail customers, something Texas began in 2001, has led to a significant lowering of costs to the consumer. Texans can now buy electricity at prices as much as 30.51 percent lower than what they were required to pay the state-protected monopolies as recently as 2001. Nationally, electricity prices have risen 35.3 percent in the same time period, according to data from the U.S. Department of Energy.
Since Texas has ended state protection of electric utility monopolies, consumers are finally able to hold providers directly accountable for any poor investments or production decisions that are necessarily reflected in prices. Now, consumers have the option of going to a more competent provider who is able to control costs.
This lesson should be particularly relevant to Nevadans who were just forced into an electric rate hike and who have no choice in providers. Nevada now has the highest retail electricity prices of all Western states with the exception of California, according to the U.S. Department of Energy. The high cost of electricity in the Silver State raises the cost of doing business and discourages firms from moving into the state.
Perhaps it's time policymakers consider what has proven so successful in Texas and open Nevada's electric utility market for wholesale and retail competition.
