The failure of deregulation

AP reports that electric deregulation, which Congress pushed through based on claims that increased competition would miraculously reduce prices for US consumers. Those claims, we now know, were totally wrong.

According to the report: "Not one of the 16 states plus the District of Columbia that have pushed forward with deregulation since the late 1990s can call it a success. In fact, consumers in those states fared worse than residents in states that stuck with a policy of regulating their power industries. An Associated Press analysis of federal data shows consumers in the 17 deregulated areas paid an average of 30% more for power in 2006 than their counterparts in regulated states. That's up from a 24% gap in 1990."

In addition, consumers in deregulated states also have suffered from "bigger price swings, as rate caps in place when deregulation began in the late 1990s were lifted in the last couple of years."

The culprit? Instead of competition producing lower rates, the choices are between high or higher prices. In some states such as Illinois, residents have no choice but to get their power from one or two mega-utilities, who are passing on soaring costs for the power they're buying.

The utilities and their Washington lobbyists, of course, are punting and asking Americans to just wait a few more Friedman Units for things to get better, because, you know, the Free Market always works best without pesky government interference.

From the article: "Utilities and their advocates are urging caution for states considering dumping deregulation. They say competition couldn't thrive under rate caps but should now that many of those caps have been lifted and the market is determining rates."

See also Robert Kuttner's New York Times editorial "An Industry Trapped in a Theory" on why electric deregulation doesn't work and this post on SirotaBlog discussing how both Democrats and Republicans are dishonestly blaming over-regulation for Middle Class economic insecurity - a truly mind-boggling lie.