Electric Visions

Unleashing the market for power.

Ryan Oprea from the January 2000 issue

(Page 3 of 3)

According to an oft-cited and influential study by economists Robert Crandall and Jerry Ellig, after 10 years of deregulation in those five industries, consumers saved over $50 billion. Airfares fell 33 percent, and service improved. Long-distance telephone prices fell 47 percent, and new technologies such as fiber optic networks emerged. In the natural gas industry, service reliability shot up and prices dropped 57 percent. Railroad shipping prices fell 44 percent, and productivity improved to the point where half the employees produced several times the output. In the early '90s, a study by economists at Clemson University suggested that electricity prices could drop by as much as 26 percent in a competitive environment.

Deregulation could also be good for the environment. Under the current system, stringent laws keep companies from selling the excess electricity they produce to other energy users. As a result, argues Trigen Energy President Thomas Casten, we waste two-thirds of all the fuel expended in producing electricity. "If a hospital has a generator and at some point produces an excess of electricity," he points out, "it is illegal under current law to run a wire across the street and sell it to a school." Casten and others believe that the sum benefits of deregulating and desubsidizing the electric industry would lead to an automatic, nonregulatory drop of carbon dioxide emissions to below even the Kyoto protocol's stringent levels.

What further improvements might be possible? Who knows? Most utilities run on 40-year-old technology; with propped-up prices and guaranteed profits, they have little incentive to adopt anything better. While legislators draft their bills, the industry's entrepreneurs are struggling under the old rules and slowly trying to make a revolution. But for now, a century of regulation is holding most of the industry in stasis.

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