In local news applicable to our upcoming coverage in 2302-4 on economic policymaking, the chron has a story covering recent criticisms by Houston mayor Bill White and State Representative Sylvester Turner about the consequences of electricity deregulation in the state for poor people specifically, and the state as a whole in general.
Promises of assistance for poor consumers who tend to live in older, less efficient homes has yet to materialize and the state now has per kilowatt electricity rates higher than the national average.
At one point the state regulated the electricity market and traded monopoly rights for loss of industry control over prices charged to consumers. Free market proponents argued that these arrangements stifled innovation by locking in existing technology. Change and innovation only occur in a competitive market. Competition also lead to lower prices because consumers will choose to buy electricity from producers who provide the best service at the lowest price.
Critics argue that this has not occurred in Texas. White is quoted in the story sating that we now have two monopolies in an unregulated market. He does not go on to say that price fixing is now occurring, but its a possibility that Adam Smith raised. In his Wealth of Nations, which argued for the virtues of unregulated markets, he cautioned that businessmen cannot met with each other without out talking about price fixing.
Expect other critics to be less cautious.
For more info on electricity deregulation click the following:
- an overview of the politics in opensecrets.org.
- a critical appraisal of recent proposals in California by the Mies Institute.
- criticism by Public Citizen.
- the home page of Texas Electricity Choice.
- a wikipedia entry on deregulation in Texas.
It worth noting that the forum was hosted by ACORN (the Association of Community Organizations for Reform Now) a non-profit group which advocates for the poor. The fight over regulating electricity is a good illustration of the interest group conflict. Industry groups vs. community groups.
