Market Power in Maryland Power, and Other Economics Stories in the News

Michael Giberson

Columnist Jay Hancock of the Baltimore Sun takes note of a complaint filed at FERC by the Maryland Public Service Commission that alleges local market power in PJM’s wholesale power market added $87.5 million to energy costs in the state. Hancock provides a link to the complaint at FERC for the curious.

Also in Maryland, some customers of Allegheny Power were upset that the utility mailed them two compact fluorescent bulbs. According to reports in the Cumberland Times-News, at first at least some customers thought the bulbs were free and later discovered the utility was tacking on an extra 96 cents a month over a year for the light bulbs. (While a different kind of program, it sounds kind of like the mandatory participation in utility program proposal that has customers upset in California. See Lynne’s post: Programmable Thermostat Regulations in California: Big Brother or Control Freaks?)

Elsewhere, the Dallas Morning News wonders, “Is electricity deregulation a raw deal for Texas?” A follow-up story profiles PUC chairman Barry Smitherman and his efforts to let competition work in Texas. Likely the panelists at this Friday’s conference at AEI will have something to say about competition and electric power in Texas.

Tim Harford provides some commentary on the Google prediction market paper. (See our earlier post: Prediction markets at Google.) By the way, Harford will be in DC promoting his new book, The Logic of Life, on January 24.

At Reason, Brian Doherty interviews New York Times reporter David Cay Johnston about Johnston’s book, Free Lunch. Doherty points out that much of the abuse Johnston ties to a blind faith in free markets actually results from government action, but Doherty nonetheless finds that Johnston does employ some sound market-oriented arguments in the book. Marty Schladen of The Daily News in Galveston, Texas, also reports on the book. A short review of the book recently ran in Mother Jones magazine.

Stan J. Liebowitz and Stephen E. Margolis, bring us “Bundles of Joy: The Ubiquity and Efficiency of Bundles in New Technology Markets.” (HT to the Antitrust & Competition Law Blog.)

UPDATE: In the comments, David Cay Johnston writes:

Your commentary on the Reason interview bollixes the facts.

In Free Lunch I cite hard data and a fascinating experiment by computer science professor, as well as tell a story, of how government created what might be called faux markets since they drive prices up. Free Lunch shows over three chapters that governments adopted laws, drafted by Enron, that created asymmetrical “markets.”


4 thoughts on “Market Power in Maryland Power, and Other Economics Stories in the News

  1. Your commentary on the Reason interview bollixes the facts.

    In Free Lunch I cite hard data and a fascinating experiment by computer science professor, as well as tell a story, of how government created what might be called faux markets since they drive prices up. Free Lunch shows over three chapters that governments adopted laws, drafted by Enron, that created asymmetrical “markets.”

  2. My understanding (not verified!) is that California subsidizes retail sales of CFLs in the state from electric ratepayers. In my last month’s PG&E bill, electricity was $95, all in. Included was $5.01 of “public benefit programs.”

    I’ve heard rumors of CFL smuggling – buying subsidized units in California and selling them in other states without the subsidies.

    So yes, CFLs are being bought involuntarily, even before the Energy Bill’s ban on incandescents.

  3. Funny, I just read the interview with Johnston, and I find that Michael’s comment, albeit brief, is certainly not a misrepresentation of the interview.

    David Cay, do you realize that the most consistent critics of rent-seeking (the technical name for the behavior you describe) are usually free-market, libertarian economists. We understand that such transfers of wealth are not market-based, but are naked exercises of government power enacted on behalf of certain favored interests, and we vigorously oppose them. At root, their cause is too much government power, with an obvious solution. While I have not read your book, I am willing to bet that you do not propose the obvious solution.

  4. Perhaps Johnston is getting at this point, as described in the Schladen article:

    Many who take advantage of such tax subsidies are fond of quoting Adam Smith, the 18th-century Scottish economist who argued that competitive markets with as little government interference as possible were the best way to run an economy.

    But Johnston, who’s studied economics at the University of Chicago and elsewhere, said those people mischaracterize what Smith said. Smith warned repeatedly of the damage caused “when government interferes with the market by guaranteeing profits or handing out gifts,” Johnston wrote.

    So rather than, as I originally summarized, linking abuse by the government to a blind faith in free markets, the abuse Johnston targets is being done by governments at the behest of businesses that often spout free market slogans.

    I’m just guessing that this is the relevant distinction. An illustrative story from the book may be the discussion of George W. Bush at the helm of the Texas Ranger baseball team negotiating with the city to use eminent domain to get land for a new stadium.

    I guess before I worry too much more about the details in Johnston’s book, I should read the book itself rather than rely on newspaper and magazine accounts.

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