Energy deregulation does not appear to be fulfilling its promise. Story after story in the nation's major newspapers over the course of the year have been saying the same thing: Electric costs have not come down and the promises made by deregulation advocates are likely never to be met.
The New York Times is the most recent to weigh in on the issue. A front-page story in October on the electricity industry offered the blunt assessment that the "Competitive Era Fails to Shrink Electric Bills."
"(M)ore rate increase requests are pending now than ever before, said Jim Owen, a spokesman for the Edison Electric Institute, the association for the investor-owned utilities that provide about 60% of the nation's power," the New York Times wrote. "The investor-owned electric utility industry published a June report entitled 'Why Are Electricity Prices Increasing?'"
The paper said that there were some moderate savings for consumers over the last decade, but those came "primarily because states, which continue to have some rate-setting power, imposed cuts, freezes and caps at the behest of consumer groups that wanted to insulate customers from any initial price swings."
But as the price caps have expired, energy bills have grown. Consider the story of Don Dunn, 77, of Howard County, Md. Dunn, according to the Washington Post, has been paying about $700 a year to Baltimore Gas and Electric for electricity -- a figure slated to increase by 72% this year.
"With something of that magnitude, I thought, God, it can't be," he told the Post in March. "My gut reaction was, gee, the whole thing is an error."
At the same time, the Post said, "deregulation has turned out well for BGE's parent company."
"Constellation Energy Group Inc.'s revenue has nearly doubled in two years, to $17.1 billion in 2005," the paper said. "Chief executive Mayo A. Shattuck III's cash compensation was nearly $5 million in 2004, up more than 176% from 2002. And shareholders are being rewarded with an $11 billion merger deal with a Florida power company."
Maryland customers, who will pay an average of $743 more per customer this year than last year, are not alone. According to the Times, the last of the state rate caps are slated to expire, causing the Federal Energy Commission and other agencies to issue a draft report to Congress warning of potential "rate shock."
The utilities, the report said (according to the Times), may "seek to make up for revenue they did not collect during the period of artificially reduced prices and to cover higher costs of fuel." The report says that "this rate shock can create public pressure to turn back from electricity prices set by the market to prices set by government regulators."
This is no surprise to those of us who saw the deregulation of electricity as a dangerous and unnecessary gamble in the first place. When Congress began working on ways to open the industry up to competition, critics pointed out how easy it would be to game the system (enter Enron) and how low-income consumers were likely to be left behind. New Jersey, for instance, made efforts to protect low-income consumers and allowed aggregation (or the grouping together of consumers and allowing municipal governments to negotiate prices), but it lacked the scale or the freedom that would have been necessary to make it effective.
I am not advocating that we bring back the inefficient limited monopoly system that most states used before deregulation. Under that approach, private companies would set prices with approval from states based on what it cost to generate electricity, with state boards tending to be more sympathetic to utilities than consumers.
But keeping the current status quo would be far worse for consumers.
The solution lies in realizing that electricity is not a random commodity, nor a luxury item that should go to the highest bidder. We have to stop looking at the provision of electricity the way we look at the sales of sports coats. Electricity -- like health care -- is a necessity in the modern world (don't believe me, talk to the people from Queens who were without power earlier this year). Leaving it to an unfettered market invites instability and leaves consumers at the mercy of investors.
Municipal- or state-owned power pools, where governments are empowered to act as bulk buyers or price negotiators for consumers, are one option; government-owned power companies are another.
Whatever system is put in place, however, must be crafted with the consumer's needs and rights in mind.
Organizations working on electricity issues include:
American Local Power Project, 4281 Piedmont Avenue, Oakland, Cal. 94611; phone, (510) 451 1727; Web, www.local.org/; email, firstname.lastname@example.org
Public Citizen, Critical Mass Energy Project, 1600 20th Street, NW, Washington, D.C. 20009; phone, (202) 588-1000; Web, www.citizen.org/cmep/; email, CMEP@citizen.org
Hank Kalet is a poet and managing editor of the South Brunswick Post and The Cranbury Press in New Jersey. Email email@example.com. His blog, Channel Surfing, can be found at www.kaletblog.com.
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