Comments on: Two views on electric utility restructuring in Pennsylvania

By: D.O.U.G.

D.O.U.G. — Tue, 01 Dec 2009 13:48:22 +0000

I checked into that statement, Dorian, and the data aren’t quite that postive, at least on the surface. Duquesne’s reported average retail rates have risen just like everybody else’s. They’ve lost over half of their retail kWh sales in the past decade, mostly in commercial and industrial (which is all but gone). Residential sales have not declined though, and the monthly residential rates top out at about 14 cents/kWh these days, while the average monthly for the state tops out below 13. The only real conclusion one can draw from the EIA data is that DUQ’s prices have not declined visibly, and that the data don’t show that retained residential consumers of DUQ have benefitted in any direct way. I wouldn’t argue that they haven’t benefitted at all, but that the picture painted by that statement could be a bit more postive, or at least complex, than reality.

By: Dorian

Dorian — Tue, 01 Dec 2009 10:47:58 +0000

"Rate caps expired in western Pennsylvania years ago, and today 20 percent of Duquesne Light customers have switched to other suppliers. The competition has forced Duquesne Light to offer more competitive prices and better services. The result: Electricity consumers are benefiting." I love it when capitalism shows that it works. Market meets demand and everyone wins, especially the consumers. Hopefully, health care will follow soon .

By: D.O.U.G.

D.O.U.G. — Mon, 30 Nov 2009 14:35:57 +0000

It took everything I had not to go there, Rick. But just to clarify for you and Hal… Though they may have held a long position prior to the crisis, Enron did not *cause* the power shortage, and Enron’s affect on wholesale prices is doubtless much smaller than most people realize. The rest of the story is too complex for a Monday morning, though I’m sure I’ve written here at length on the subject in the past.

Here’s an article that explains the physical aspects of the crisis in some detail:

http://tinyurl.com/9gzx7

By: Rick Caird

Rick Caird — Sat, 28 Nov 2009 18:05:03 +0000

Hal JordanN has a poor memory. California did it to themselves. First, they only deregulated at the wholesale level, but not the retail level. That left the distributors scrambling for supply but unable to charge even their costs to the end user. Hence, the end user had no reason to change his behavior.

Second, the reason California had to rely on an Enron was their inability to all construction of generating plants of any kind. Hence, California had to go outside the state for supply.

No, California was the victim of its own idiocy. A trait they continue to this day.

Rick

By: D.O.U.G.

D.O.U.G. — Sat, 28 Nov 2009 00:43:15 +0000

Max, it might help if you’d explain what the differences were in service levels and other characteristics. Better or worse?

Both articles have problems. Brouillettes is the one who seems more Utopian to me because he is all-positive about competition. Epstein, on the other hand, spews ill-informed invective in the other direction. Neither case is really that clear. Not to mention that nobody seems to be able to differentiate between taxpayers and ratepayers. Epstein has the utilities increasing taxes on ratepayers, but it’s not immediately clear how that could have occurred. He may not understand the point of stranded costs, but that’s not clear either.

The Carnegie Mellon study *as described in the article* doesn’t say that the deregulated states cost 2-3 cents/kWh more than the deregulated states well before deregulation. The usual reason for deregulating was to introduce competition because prices were high, and because regulation was thought to have failed. Nevertheless, CMU’s conclusion is about as good as one can do from retail sales and revenue data.

Unfortunately, you can’t really tell whether prices are lower or higher in deregulation because history does not reveal counter-factuals. (That is, what would have happened otherwise? Are you sure you know?) Plus, stranded costs being awarded and collected clouds the issue everywhere it has occurred, as have capped retail rates, wholesale price caps, etc. Regulation and “deregulation” have both been screwed up in creative ways many times in many places. It’s just not ever going to be a clear call because we’ll never know what screw-ups were avoided when we chose the screw-ups that we chose.
Consequently, it is no surprise the business writers are confused, or that they average out to no value added.

By: Max

Max — Fri, 27 Nov 2009 15:11:07 +0000

Well, these views are very different I am from Germany and I really felt the change from state-owned electrical companies to privately-owned end-suppliers that nowadays dominate the market. It is a big difference and especially when it comes to service levels. I am more on Brouillettes side than Epstein, who obviously has some utopian fantasy about what happens when you deregulate ^^

By: Hal JordanN

Hal JordanN — Fri, 27 Nov 2009 14:29:53 +0000

Electricity deregulation has NEVER lead to a decrease in utility prices consumers pay.
See the ENRON fleecing of taxpayers in California for the most blatent example of the free market failure produced because of deregulation.