Saturday, August 16, 2003

Kuttner on Energy

Bob Kuttner has a nice succint editorial on the evils of energy deregulation. And, look, for all my monkey readers - I'm one who thinks that a certain degree of "deregulation" in energy markets could be a good thing. But, it's always going to be a mix of very heavily regulated (the transmission grid and retail) and the less regulated (wholesale energy manufacturers). As such, it's going to be somewhat of an "artificial" market created and maintained by government regulation and oversight. Once that oversight goes away, the system will gamed.

And, yes, for the recent blackout Kuttner hits on the key issue with deregulation:

Third, under deregulation the local utilities no longer have an economic incentive to invest in keeping up transmission lines.

There it is, in a nut shell. Energy companies have no more incentive to build transmission lines than trucking companies have an incentive to build highways. So, when the government inevitably steps in to solve this little problem the worry is that the power companies themselves won't have to pony up a single cent, letting the free ride off the infrastructure.

Now, letting them free ride off the infrastructure isn't necessarily a bad thing, unless they are monopoly *owners* of that infrastrucutre with little regulatory oversight.