Is Texas the antidote to California?

Many electricity economists, including me, have argued that Texas is the antidote to California. Although neither state has implemented what I would call deregulation, the Texas model is a far sight more flexible, enforceable, and in touch with economic reality than the dysfunctional policy failure we saw in California. Texas’ electricity “deregulation” is not a slam-dunk, though, as this article reprinted from the Ft. Worth Star-Telegram indicates. The article provides a nice summary of the complexities and the issues involved in doing partial, incremental deregulation. What it doesn’t do, though, is point out how much of the slowness of benefit realization is a function of what I call “regulation hangovers,” or vestiges of regulation that persist as part of the political compromise to get deregulation legislation passed. Furthermore, the author relies on the statistics about customer switching, which is a really poor indicator of the benefits derived from deregulation. For one thing, it overlooks the changes in the quality of service that the incumbent can offer to keep its customers from switching. The real benefits of electricity deregulation are about choice, and having choice; whether or not customers choose to exercise that choice is only part of the whole story. I plan to write more on this topic later this month, but for now, I’ll leave it at “don’t blame deregulation when true deregulation hasn’t happened.”

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