California has written the book on how not to pursue utility deregulation, and now the damage is that their leaders will use the current crisis to demagogue against the concept. As Pete duPont has recently reminded us, the idea of price controls goes back at least 4,000 years and they have always failed, particularly when prices are capped at retail and allowed to float at wholesale. True deregulation would have allowed the price structure of supply and demand to balance the market, and would have included market entry by new competitors. Deregulation should mean less political control, not more, but California’s liberal establishment wants “consumerism” and “environmentalism” simultaneously, an impossibility which has led to policies encouraging unlimited demand without incentives for growth in supply. The solutions now will be difficult, but re-regulation is not a viable option, nor is more cost-plus rate setting, a flawed concept that left us with much of the “stranded cost” debacle from the nuclear plant construction fiasco of the 1970’s and 1980’s. The only remaining choices are anathema to the left: back off on their long held hostility to new power plants or pay increasingly higher prices for electricity. Welcome to the realities of the market.
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