By Emma Bailey
One of the most hotly contested topics in contemporary U.S. politics is energy deregulation. Some on the left feel that only big government can cope with the demands of the energy market and ensure customer protection. Those on the right, however, claim that the same engine of prosperity that functions admirably in other sectors of the economy, i.e., the free market, is the best guarantor of efficiency and customer satisfaction.
The roots of the current debate date back to FDR’s New Deal and its interference in the economy. Under a 1935 law, large utility firms were forced to break up, and local monopolies were set up. Of course, without competition, it’s hard to see how they had any incentive to provide good value to their customers, who were locked into their electric and gas suppliers through the happenstances of geography.
Fortunately, the Energy Policy Act of 1992 began the process of allowing for competition in this space. There doesn’t seem to be any downsides to energy deregulation. Those who are satisfied with their existing supplier aren’t forced to change anything, while those who receive a better deal elsewhere are free to switch. In the past few decades, airlines, railroads and communications have been deregulated with lower prices and better service as natural consequences. There’s no reason why the outcome should be any different in electricity deregulation.
Deregulation was adopted with great success in Pennsylvania. It started in 1998, and by October 1999, more than half a million consumers had decided to change their electricity suppliers, according to the Washington Post. Those who selected the cheapest option were able to save about $10 per month.
The left-leaning green movement as a whole is largely clueless about energy and economic policy, of which deregulation is just one part. Many of the same people who are opposed to deregulation are proponents of green energy. Yet by supporting monopolies, they’re discouraging innovation and experimentation with solar, wind and other means of clean electrical generation. Plenty of firms that compete in deregulated energy markets offer green electricity packages. Texas, long touted as an example of environmental unfriendliness, has been changing its image in recent years, in large part due to its deregulated energy market. Texans have been flocking to environmentally friendly energy options, which might not have been available under a regulated, single-provider regime. In fact, Texas now leads the nation in wind energy capacity and production.
Governments, both at the national and state level, often provide incentives for investing in renewable power. Yet the government is not in the best position to determine which energy providers offer the best or most cost-effective products. Elon Musk, chairman of SolarCity, has stated that his business model depends on receiving “tax and other benefits” from government. What this means in practice is that those businesses that qualify for subsidies gain a competitive advantage over other companies that may be generating energy cleanly without any assistance from government. A perfect example is nuclear energy, which is one of the most pollution-free forms of energy ever developed but deprecated by the liberal environmental movement. The development of this type of energy has been stalled through the efforts of those who ostensibly wish to protect the natural environment but who are really opposed to nuclear power for other, political reasons.
Even if you oppose the hijacking of the political process by those who scaremonger about possible environmental catastrophes, you can still care about our natural surroundings. There are plenty of ways for private individuals to do their parts to conserve nature, from voluntary recycling to the purchase of an electric vehicle or green electricity plan. There’s no need for government bureaucrats to tell people what to do; they should let people make their own decisions.
When dealing with a complex and interconnected subject like energy production and distribution, it seems ridiculous to believe that legislatures and politicians will have all the answers. By letting different entities fight it out in competition with each other, the best solutions will tend to rise to the top and will most likely become cheaper over time, too. The government’s true role is to act as a referee and establish rules to allow the contest to be fair for all, not to restrict entry, determine pricing policy or award subsidies to politically favored or connected groups.
Emma Bailey is a writer in the greater Chicago area who covers technology, entertainment and business. She enjoys reading novels by humorists, cooking at home during the week and eating out on the weekend, and watching indie movies (especially anything mumble-core). Follow her on twitter @emma_bailey90.