From MasterResource
By Robert Bradley Jr.
“A free market in electricity would terminate the current provisions of landmark federal statutes, such as the Power Act of 1935, Public Utility Holding Company Act of 1935, Public Utility Regulatory Policies Act of 1978, Energy Policy Act of 1992, Energy Policy Act of 1995, and Inflation Reduction Act of 2022.”
My new AIER primer defines and applies the free-market classical liberal worldview to electricity. This is particularly important because this sound perspective has been both forgotten and misapplied.
Forgotten regarding the criticisms of traditional public utility regulation that emerged in the 1960s; misapplied regarding the current mandatory open access era involving central planning at the wholesale level with ISOs/RTOs.
My major points with quotations follow:
1. Electricity is a free-market product with a clear free market, classical liberal meaning: the separation of government and electricity in all phases and in the whole.
“A free market in electricity is defined as the absence of government ownership, control, or regulation. Electricity and government are separate, apart from legal protection against force or fraud. Government neutrally upholds the enforceability of private contracts and other market norms under the rule of law.”
“… contra government direction and control, from municipal ownership to franchise protection and cost-based rate ceilings (public-utility regulation); to mandatory open access for outside parties (an uncompensated taking); to renewable requirements (the forced energy substitution of wind and solar).”
“Grid electricity was never considered a common-pool resource at odds with definable private property rights and efficient operation. The ‘commons’ theory of governmental organization arose only with the government-mandated open-access transmission, itself a clear violation of private property rights.”
2. Electricity, while having unique qualities, is subject to market forces and does not require government intervention or ownership. The US power sector has a clear free market history for empirical evaluation—and no demonstrable market failure.
“Highly coordinated multiphase operation, evident in petroleum and natural gas (in a free market), was required by the uniqueness of electricity. Governmental franchise protection was not necessary.”
“The market era was characterized by declining rates, expanding usage, and reliable service…. Market-directed integrated operations resulted in unprecedented affordability and continuous, coordinated service.”
3. Electricity is the second-most regulated sector of the U.S. economy today, next to money and banking (outside of the military industrial complex). It is an unholy mix of public utility regulation; government-enabled dilute, intermittent wind and solar; and mandatory open access.
“Today, a growing number of regions are subject to rising power rates, conservation appeals, and service interruptions.”
4. Mandatory open access has introduced its own problems under de facto socialism, particularly pricing for reliability.
“Economic calculation has bedeviled ISO/RTOs…. Some regions have implemented ‘capacity charges’ to reward generators for standby capacity. Others have banked on ‘energy only’ prices, betting that ample capacity would be incited by periodic price windfalls.”
“Consumer welfare and ‘the obligation to serve’ have been lost in the transition to central planning, as well as in the governmental quest for decarbonization. Worse, agency errors … have been protected by sovereign immunity.”
5. Public policy going forward begins with federal deregulation of electricity (state deregulation would need to follow).
“A free market in electricity would terminate the current provisions of landmark federal statutes, such as the Power Act of 1935, Public Utility Holding Company Act of 1935, Public Utility Regulatory Policies Act of 1978, Energy Policy Act of 1992, Energy Policy Act of 1995, and Inflation Reduction Act of 2022.”
“Competition could entail direct rivalry with duplicate facilities, or it could be a single firm maintaining a market against potential rivals. Either way, the private and public costs of government intervention could be bypassed and market signals established.”
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There’s no such thing as a free [energy] market in the UK, quite the reverse. It’s morphing into a command economy. EVs, heat pumps etc must be forced as people will not buy. All that remains – apart from the very slim chance of finding some alternative that really will work right now – is to force people to behave in a certain way; so called nudge science. Less is more etc.
Consider this. Many of us railed against the supposed scientific basis for lockdown. Such voices were silenced as mis/disinformation. Now many of the advocates – especially the media – appear to have been amazed at the extent of the [societal] damage done; especially to children and young adults.
If you had advocated all that and more and been so wrong, you wouldn’t expect a promotion, would you…
“”Minister of State for Science, Research and Innovation””
https://www.gov.uk/government/ministers/minister-of-state-for-science-research-and-innovation
In this paradigm, you can.
Fun fact. Prince Harry doesn’t get security provided and is fighting it in the courts.
Yvette Cooper, Home Secretary and…. yes, Sadiq Khan leaned on the Met police to provide a private individual, Taylor Swift, with a blue light convoy.
“…after the Sun newspaper’s splash this morning, that Home Secretary Yvette Cooper personally intervened to ensure that Taylor Swift received a police convoy to her Wembley shows. Priorities, priorities…
…
Cooper and London mayor Sadiq Khan personally persuaded the force to provide additional protection for the singer and her entourage – at a cost to the public purse.”
https://www.spectator.co.uk/article/cleverly-slams-home-secretary-over-swifts-special-escort/
A shining example of the new feudalism.
“Consider this. Many of us railed against the supposed scientific basis for lockdown. Such voices were silenced as mis/disinformation.”
Whether right or wrong- you should not have been silenced.
I agree. But narrative control demands censorship as a most basic tool.
This year has been wet and grim for the most part. But I’m told its been hotter than ever, drier than ever and wetter than ever. No sceptic gets a platform to discuss any of it.
I tried discussing it here in Wokeachusetts. I’ll find good articles here and elsewhere- I’ll send them to key “players” in this state- government officials, enviros, forestry people, others. I get ZERO responses. They want NO discussion. If I wasn’t already a retired forester, they’d probably take away my forester license or attempt to. They tried that in past years for “ranting” against forestry policies.
nobody was silenced, their reach was limited,
Missouri v Biden would like a word
Never seen you this wrong before,
Seriously? I don’t perceive a change in how wrong mosh is on any topic. He’s a paragon of consistency.
People who didn’t believe the Covid story were indeed silenced.
One U.S. news outlet has yet to include a skeptic scientist of any caliber on its program this year* to offer rebuttal to the pro-AGW scientists they feature relatively frequently to discuss the topic, such as Dr Michael Mann.
— * actually, the news outlet has not provided its audience with extended details from skeptic climate scientists going all the way back to 1996.
“NewsHour Global Warming Bias Tally, Updated 5/22/24: 124 to 0”
Is exclusion not, in effect, a form of censorship? These scientists may speak elsewhere, but how is the public to know about that when they do not know such opposition exists?
That is NPR “NewsHour”? NPR receives public funding.
NPR is National Public Radio, equally biased, but I have not quantified that place. The NewsHour is on PBS, the Public Broadcasting Service, partly if only minimally funded by taxpayer dollars, but much more by leftist foundation grants and by that network’s routine public donation begging efforts. Liberals empty their wallets into PBS. Conservatives call for the taxpayer funds they do get to be erased.
Oh, and that is so different how?
Robert, I understand what you are saying, but billions of dollars worth of investment decisions have been based on the current regulatory scheme. It creates the winners and losers. How do you propose getting back to a purely market driven system without vast investment and job losses?
Sunk cost fallacy. Better to change course sooner and avoid further investment and job losses down the road, instead of continuing to throw good money after bad.
Remember the sunk cost fallacy during the Viet Nam war?
“We have to continue fighting or all those brave young people will have died in vain.”
Except casualties do not define if a war is right or wrong. Casualties are the consequences of the decision to wage war.
Yes, investment will be needed, but all that is needed to achieve that is a reasonable prospect of a positive return on investment. No coercion or taxpayers’ money is needed.
No, there will not be net job losses, because as soon as the price of electricity starts coming down (or even not continuing to head towards the stratosphere) there will be more employment in the sectors that use electricity. There aren’t many sectors that don’t use electricity directly or indirectly.
Fair question. First, ‘Is’ does not equal ‘Ought’. The intellectual and practical case must be established for such fundamental reform. Second, the state legislature would need to sunset its public utility regulation with a date certain, and instruct consumers and providers to enter into contracts covering rates, reliability, and other terms of service. State officials would also need to ask FERC and other federal agencies to provide a waiver on regulation. Just ONE state could do this to show the country the results.
The “sunset” need not be a step function. It can be an incremental transition over a “reasonable” timeframe.
One of the greatest fallacies of this so call energy transition is it is being approached step wise. Anyone familiar with classical control theory (aka systems engineering) knows a step function always creates transients and those transients are quite often harmful.
Just date certain to end it all. Say six months for contracts between parties in a ‘monopsony/monopoly’ situation. The utility would offer default rates/terms, and contract brokers could organize all those who do not like the default offer.
6 months, x months/years, all needs to be debated and analyzed.
But it does need to be planned, not just throw the kill switch.
Experience has shown that when a heavily-regulated industry (railroads, bank, airlines [US example]) is deregulated, the legacy firms just don’t know how to do business, and often end up in bankruptcy court.
Free as in unregulated can lead to ENRON and pricing of $9.00/KWh
Enron was just the opposite of unregulated. Enron feasted off of wind and solar subsidies and championed mandatory open access to make money off of electricity trading.
Dream on.
I categorically oppose “Free market electricity”.
Utilities are inherent monopolies. Removing controls over this sector is not going to lead to better outcomes either in the short or long term. What is notably missing from the supposed “background” above is that classic liberal economics held that keeping costs low via government regulation of natural monopolies is what enables nations prosper.
Removing all of the regulation noted above will simply lead to reformation of monopolies – think PG & E, but 100 times worse.
The problems occurring are due to abuse within the regulatory system; the solution is not to overturn the table, but to fix the political system that is abusing the regulatory system.
You make valid points even without being opposed.
There is no simple answer, of course. The point of course it to get the government out of the business of micro-managing the industry. In that context, there are some points in the article that need debate and better answers.
There are laws on the books that were applicable in the era they were enacted that need to be revisited and updated or cancelled as appropriate and applicable.
Define what “micro-managing the industry” means.
Do you mean you desire abolition of the NERC and FERC?
If so, I vehemently disagree.
I am perfectly fine with forcing the government out of meddling in utilities in the form of renewable energy mandates, subsidies and what not – but to throw out the regulatory apparatus completely just because of this one, particularly egregious, abuse is idiotic. The FERC and NERC were specifically created to ensure a minimum standard of competence, reliability and economic viability in electrical utilities after the horrific abuses and failures of the early era.
If anything, the FERC/NERC are not strong enough: there is a clear trend of underinvestment in, for example, large scale transformers in the grid which is entirely a result of financial fuckery by utility companies. Yes, regulated utilities are still perfectly capable of fuckery as PG & E has abundantly and repeatedly demonstrated – starting with its $40M ballot measure to cement itself as a permnent fixture in local and municipal systems to its multi-decade underinvestment in maintaining power lines and infrastructure to any number of other nonsense schemes.
So I disagree that the government is “micromanaging” – it is not. All we are seeing is the promotion of a specific climate change agenda morphed into a subsidy farming scheme in solar PV and wind – it is not emblematic of federal regulation of utilities, overall.
Remember that PG&E’s investment decisions, and those of other regulated utilities, are shaped by those very same regulatory bodies, via their decision of which costs can be included in the rate base, and which can’t. Then of course, the regulatory authorities also guide the regulated utilities into investing in the “right” areas. Has little to do with the FERC and NERC, and a lot to do with the PUC (or whatever it is called in your state).
Please read the primer to understand that the ‘natural monopoly’ argument never resulted in consumer exploitation. Today, consumers can be organized to create a monopsony/monopoly situation. Low transaction costs in the digital era.
Natural monopoly, true, and the benign monopoly such as the Bell System.
Bell reliability was unsurpassed. The phones were virtually indestructible.
Bell made long distance calls possible and with quality communications.
Bell Labs invented the transistor, the bases for all of our modern technology even though most do not remember how it all started.
@Rob Bradley Jr
The primer is utter bollocks.
The US health care system is a perfect example – one costing Americans well over $2 trillion a year in excess cost – showing precisely what natural monopolies, oligopolies, and monopsonies can do to an economy just in this one area.
Equally, consumer organization is a myth for anything of actual real world importance. PG & E is hated by almost all of its customers – but what are they going to do? And as bad as PG & E is – none of PG & E’s customers were ever hit with $8000 power bills as happened with those suckers in Texas who bought into “wholesale energy”.
The “Free Market” is dependent on competition; I am fine with government ensuring fair competition but that also requires “dat evil gubmint”.
The other garbage theory that the “Free Market” is dependent on, is that consumers really are perfect information accessing and processing robots. Nobody checks the price list when they’re bleeding to death on the way to the ER – for that matter, the “free market” of health care in the US has resulted in literal impossibility to know what anything actually costs.
In contrast: the socialized medicine systems that exist literally everywhere else in the entire list of other 1st and 2nd world nations – price lists are ubiquitous.
I am convinced the only reason Americans are so libertarian is because they literally don’t know how bad they have it because they don’t travel internationally enough to see what the alternatives are.
The US health care system is a perfect example
I don’t see how anyone could possibly view health care in the US as a natural monopoly. If anything, it is a perfect counter-example. Let’s just look at “Certificate of Need” laws “which require providers to apply for state permission before acquiring equipment or providing certain services to patients”. (https://www.mercatus.org/economic-insights/expert-commentary/now-time-eliminate-certificate-need-laws-limit-hospital)
“Nobody checks the price list when they’re bleeding to death on the way to the ER”
but
“the socialized medicine systems … price lists are ubiquitous.”
The one has nothing to do with the other, unless you’re suggesting that people who have socialized medicine DO check price lists on the way to the ER.
(And you probably won’t believe it, but I CAN get price info in advance with minimal effort if I wanted, and when determining a treatment plan for something, I have done so multiple times.)
Yes, the British NHS is so good.
Not necessarily true (the “inherent monopoly” idea). Here in Ohio, I can choose from something like 20+ gas and electricity providers (some based out-of-state). I choose the period, whether I want to pay a monthly fee to get that rate, how much I want to support ‘clean’ energy, etc. The State hosts an “Apples to Apples” comparison web site where I periodically go to change providers if someone provides a better price for a longer period.
Personally, I’m amazed at the range of prices provided – easily a factor or two between the cheapest and the most expensive.
There is a local supplier who gets a small cut to get the gas and electricity to my house. That I cannot change. But the bulk of my monthly payment goes to whoever provides the best deal.
We still have state regulation, but at least I get a choice in a more free-market format than what we dealt with some decades ago.
I love the idea of free markets but as soon as equipment like transmission lines use politically decreed land rights and economically needed capital financing, the game is over.
Like IF it’s a free market, AND electricity needs land for a substation in New York City, then what is the value of an electron in New York City vs the same electron 20 miles outside New York City?.
On eminent domain, the surface owner should not own the land below or the sky above unless it impacts his/her property. So, in urban areas, large tunnels could house a host of cables without having to employ eminent domain at the surface. Water, electricity, telecom, etc.
We went thru electrical deregulation here in MT back in the 90’s and it
was a disaster on every level. Google * Montana Power Company Deregulation*
Free Market–yea right.
That was not deregulation but mandatory open access with the ‘freed’ commodity called ‘deregulation’. My primer argues against just this.
If we didn’t do anything other than stop subsidies, tax preferences and mandates we would be well on our way to fixing the mess we are in now. The next most important move is to reel in all of the agencies like EPA. No agency should have the power to make rules, regulations or law, that is congress’ job. More importantly they should not have enforcement or judicial powers. Along with that they must be able to backup what they claim with proper science, showing all of their work. It must be solid enough to convince skeptics.
“they must be able to backup what they claim with proper science”
Who is “they”? Someone has to decide what proper science is. If you are willing to spend time and money on it, twelve people missing work for the day will choose.
My suggestion is for skeptics to have access to and a vote as to whether the work was done properly. I see nothing but pal review supporting EPA work and other like agencies, if there was any review at all.
You will need volunteers. If we, the skeptics, had free time from our families and work and other commitments, we would be doing the science.
Otherwise, yours is an idea of merit and should be considered.
It is hard to see this ever working. Firstly AC power transmission relies on every power station connected to the grid have the same phase and frequency. How exactly would that work unless there is a central body with oversight and control over the grid. The only alternative to government control would appear to be for each power station to have its own completely seperate set of wires and to supply only the people in the local area.
Secondly given the infrastructure costs of supplying electricity to remote rural areas it is unlikely a free market would invest in such a grid since it would always be more economic to focus on higher density wealth areas. This is clear given the slow deployment of optical fibre to rural areas compared to cities. Do you really want to force rural dwellers to pay a lot more for electricity especially given that they are on average poorer than the rest of the country?
It is obvious that you have no idea what the system consists of since it is already a electrical standard set up to make it work everywhere.
The prehistory of public utility regulation (see the primer) solved just this. In a real free market, large economies of scale from vertical and horizontal integration will handle the grid issues. A market discovery process will decide what firm owns what and what interfirm contracts ensure reliability (with the company’s capital on the line, not ISO/RTOs protected by sovereign immunity).
“large economies of scale from vertical and horizontal integration” seems just another way of saying electricity companies will become monopolies. Which is the opposite of a free market. How do you propose to ensure competition without driving up costs by doubling the needed infrastructure to supply the electricity.
Also your primer is unreachable. I get a 404 page not found error.
I think we need a comprehensive and mandatory federal program to sell all US generation to the AI guys. They need the energy much more than you do.
And any surplus over and above AI needs could be sold on the free market to all the noble monopoly public and private electric utilities who would heroically distribute the surplus electricity to businesses and homeowners while nobly saving the climate.
yes bing on a free market,
and while we are at it, lets revisit using DC instead of AC
and 6 phase power, and open up voltage standards,
regulating frequency? pffft.
string your cables where you like, bury them anywhere.
You are raising points worthy of debate even if in a sarcastic tone.
Not sure the DC will fly. Bad enough to have 120/240 Vac overhead. Not sure I would want 1000 Vdc when the wind knocks down the power lines. Just a thought.
During the Civil War, Lincoln standardized the railroads to a common gage (4 ft 8.5 in). In the Confederacy, each had their own standard and rail transport was severely impacted. Obviously the US rail system was more efficient.
Air traffic controllers around the world all speak English. Makes communications more efficient.
Two competing systems of measurement, imperial (also US) and metric. Make communications more efficient.
During the Civil War, the military migrated to standard ammunition and weapons. Made logistics more efficient.
Having standards to enhance efficiency does not require government regulations or oversight. The problems that exist today are government overreach, oversight, and burdensome regulations.
IEEE has standards. Other engineering disciplines have standards. MIL-STD-1000 (no longer in effect) put forth drawing standards. The list goes on.
There is no reason to assume the energy industries will not embrace common standards just because they will make more money if they are more efficient and the customer will pay less.
Fancy words but not a clue what they mean! Where did you obtain your engineering degree?
Maybe this is covered in your white paper, but I don’t understand how free market transmission would work.
First, would monopoly laws be in play? If so, how could one entity (however owned) be allowed to own a single transmission system? If so, then must the government allow any transmission company to put up poles or dig trenches on their property or easements? If so, how would that work practically and economically? If no, isn’t that regulation? If so, wouldn’t the owner of a transmission system be, in effect, a monopoly?
I’m guessing you’ve worked this out, so where can I read it? I get a 404 error when clicking on your link to “the full Explainer.”