More Competition Via Deregulation For The US Electricity Industry?

The electricity market in the US appears to be opening up, that’s according to Energy biz editor Ken Silverstein, (bold emphasis added)

“While retail deregulation has fallen short of its promises, wholesale markets where industrials buy directly from generators are opening up. And the subsequent efficiencies are benefitting smaller consumers, who are also expected to see added improvements once their providers implement smart grid technologies that maximize efficiencies.”

And a genuine “deregulation” should translate to more competition. Adds Mr. Silverstein, (bold emphasis mine)

“Despite strong sentiments on both sides of the restructuring debate, it is too late to reverse directions in the wholesale market. That's because of the existing investments in unregulated generation and the sales efforts built to support that. The goal then is to create a fair market that enforces equal access to the grid and allows at least big buyers a choice in the matter. Any efficiency gains would then be passed down to smaller users.

“Deregulation has not been the panacea that supporters had hoped. But it is impractical to reverse course, particularly since customers are still switching.

“Under regulation, ratepayers may bear the risk of mistakes resulting from where and how investments are made. In competitive markets, however, the penalties for such mistakes fall on management and shareholders. Such accountability leads to better results, say proponents of deregulation, adding that the transition period from the traditional regulatory model to robust competitive markets takes time.”

Some comments:

The industry appears to be responding to the dictates of consumers more than the political supporters of a closed industry.

Perhaps this has been due to the ratchet effect or the “tendency of people to be influenced by the previous highest (or best) level of a factor (variable)” from the previous attempt to deregulate.

Next, this is exactly the difference between free markets and socialism: the profit and loss incentive versus collective risk taking.

Another, technology appears to be a critical factor in helping push consumers to demand for more competition.

Mr. Silverstein anew,

``The most significant catalyst for more efficient retail and wholesale energy markets will be less about new rules and regulations and more about technologies centered on the smart grid that can provide enhanced services and cleaner options. Utilities that incorporate those tools will, indeed, enjoy more competitive positions.”

If the trend towards more competition via deregulation is true, then this area should be a bright spot in an otherwise bleak- “socialization” of the US.