Utility Deregulation Do we need it or not?

I know there is a vast array of people on this forum from all over the country and world,so I come to you to see what your opinions are on utility deregulation. Some of you live in states/countries that have it allready some live places where they are thinking about doing it and some don't have it at all. I am working inconjunction with another guy here in Michigan to start a grassroot effort to halt plans for electric deregulation here and maybe to turn the deregulated services we have around,but I need other peoples input on what they think about it in their areas? is it worth it? have you seen cheaper prices? how about service? etc.?
We ourselves cannot see any benefit to consumers in Michigan by deregulating utilities.

The rap is that if you deregulate, then competition will eventually bring prices down and level the playing field. That has not happened. Look at the mess in California. Also look at the airlines since deregulation. In some things, that are massive enough and involve Billions of dollars, regulation is imperative.

I was raised with a belief that "competition = good". By deregulating industries, you open that industry up for new entrepreneurs to enter and create additional competition, thus increasing service and decreasing prices.

I just am not able to understand where the consumers will benefit if the government removes competition and tells businesses how to operate.

Dave

De regulation can help in the long run by encouraging new power sources. BUT! deregulation with so many restrictions on building power plants will cause shortages every time. The biggest problem is that you must have price caps to prevent price gouging and that is not what happens! Instead you get a few large and greedy power suppliers raising prices knowing that any new competion is years away and feeding on the desperate public they are supposedly serving.

We cannot build any type of power plant that has zero impact on the environment. Dams divert waters from their natural courses, Wind mill farms are accused of being deadly to birds, coal pollutes as does any fossil fuel source and the prices on natural gas make for very expensive power generation plants. Solar power is great for those who can afford the initial investment and have enough sunshine to make them efficient but the majority of the worlds population cannot afford the luxery of being off the grids and remain at the mercy of the power suppliers.

Deregulation works great in theory and may actually work in fact someday....but I wonder if many of us will live long enough to see the good side of it come to be! But I could be a bit on the pessimistic side of this since I live in California and not Texas!

Zanymuse,

The majority of the world's people are often off the grid. Yes, cities and towns are often connected to grids but hundreds of millions of people cannot afford hookups or are the mercy of intermittent supply.

So let's keep the discussion to affluent North America where demand is king, and all other considerations are secondary. God forbid that we should invest in efficiencies and technological solutions when we can keep drilling and pumping and mining and building dams and hydroelectric facilities...gasp.

I also live in California. And I have lived long enough to never see true deregulation of any utility -- there have always been sweetheart clauses in any deregulatory lawmaking. Those that have the generators want the advantage of their monopoly. Those that control the pipelines want to direct product for maximum returns.

Where is the incentive to deregulate? The consumer wants readily available energy at the cheapest possible price. Governments listen to those calls. So, "deregulation" bills are written with assurances that down the line, energy will be had much more cheapily because of competition. Econ. 101 spoke of inelastic demand. Think about that from the point of view of a potential small competitor trying to enter the energy market. Cheaper energy does not drive up demand significantly. Only the largest energy companies will likely come to redominate a deregulated system. Ask how it all works for the farmers; reduced income at farmgate does not increase demand for more food.

Man, that's a lot of preachin'

Well, to my simplistic way of thinking, I pay one way or the other - either the government uses my tax $$s to to subsidize certain industries, and keep prices artificially low or.....we cut out the middle man (aka government) and let the (potentially brutal) free enterprise system do what it does best, which is to find the natural equilibrium between supply and demand.

We need to come to grips with the fact that we can't continue to have cheap energy AND shackle (with regulations) the businesses that would create alternative energy sources if they were given the freedom to do so.

Marshseed hit the nail on the head: "Only the largest energy companies will likely come to redominate a deregulated system."

This very topic was being discussed on the local PBS station this afternoon. The commentator made mention of the fact that although there are many long distance companies, for example, the majority of folks still use the 'big 3'; AT&T, Sprint and MCI.

I'm taking a wait and see attitude. Texas is scheduled for de-regulation on Jan. 2002. From what I've read/seen so far, the only real incentive to switch would be to use a 'green electric' company. Otherwise, the $$ savings, based on our conservative consumption, is nothing dramatic.

Here in Michigan last May the legislature passed a bill about deregulation. Part of the deal allows power companies here to add SURCHARGES to power bills to offset the costs of deregulation. The problem we are concerned about is very often these charges are felt more by the every day consumers then most large industries who often have special deals with utility companies and that these surcharges to recover stranded costs is nothing more then a bail-out for the industry. When trucking,railroad and airlines were deregulated they were not paid for their losses and we don't feel utilites should be either.Also, since the existing utilities in Michgan will continue,under deregulation, to control the transmission and distribution of electricity,these companies will be in a postion to limit the choice customers actually have. Our fear is that these utility companies will continue to exert market power but without government oversight.In the mean time,no one is building large coal or nuclear plants because they are unsure of their customer base to recover such large investments,so everyone is putting in gas turbines,which consume huge amounts of nat. gas causing nat. gas prices to explode. In short we are trying to place a modern day necessity in a free market and now the big investor owned utilities have figured out they can make more money unregulated.

This continues to be a difficult thing to come to terms with. It's one thing to have competition in industry for things that are luxuries rather than necessities. Businesses will compete to produce a better product for a lower price as that is what lures or persuades the consumer to purchase. The situation is entirely different with necesities. If it is an item that you need, and they choose to all raise the prices, where is the competition for business...there is none..because people(most people) need electricity.Afterall, I don't want electricity, I need it.

I don't care for deregulation myself. The situation in California was all I needed to see. I do believe in opportunties/grants for those who have a feasible way to generate power in a more economic or planet friendly way. How many studies has the government financed that some of us thought were completely ridiculus? I was also surprised that no one mentioned nuclear power in their posts. Why was that?

Carol: I may be misreading. Are you saying that DEregulation caused the situation in California?

Dave

Dave, a number of factors have done in California not just deregulation alone. there has been explosive growth in the power hungry high tech sector,more homes and commericial developments and again the high price of nat.gas,and enviromentalists. also the power companies have taken heavy losses because of the wholesale power price regulations put into place through the 1996 deregulation law,which coupled with enviromental laws caused no new building of power plants, along with no one will work together on solving supply problems since they are all competitors.

Carol7, I did mention nuclear plants, there is talk about them being built but very cautious talk but 2 problems exists, one is enviromental concerns and two is the cost of building the plants as what happened in California, when deruglation goes into effect the availability of supply becomes uncertain because producers of electricity won't be able to count on set rates and then that leads to them to choose or not to choose to build new plants or expand existing plants.

I should mention that there is another alternative technology which is fuel cells. They remove hydrogen from natural gas or propane to make electricity. but again is the cost unless they use a home natural gas or propane source their cost will be about 18 cents per kwh compared to regular electric costs now of about 8 cents per kwh.
Solar and wind is looked at also but several factors go against them and one is they have limited use for supplying electricity on a large scale,but with constantly changing/improving technologies they might become more widely thought of in the future.

I am of the opinion that it really doesn't matter somehow... for example, the small utility co-op that supplied my electricity when I lived in Boone, NC didn't produce their own power... they bought it from a conglomerate that included Duke Power, Carolina Power, et al, who buy/swap electricity from another group that links more than half the USA. Would de-regulation change that?

I agree with Bloomer.."Marshseed hit the nail on the head: "Only the largest energy companies will likely come to redominate a deregulated system." As Bloomer said look at the telephone companies where 3 companies dominate, dispite deregulation. My long distance company buys time from the big guys... so I get it a bit cheaper. Makes me wonder how much profit the big guys really make in spite of the corporate balance sheets... if they can sell it cheaper to smaller companies (who also make a profit), why not cheaper directly to us?

Look at the gasoline consumption of our automobiles... we all have read for years that the car manufacturers could do better; some say they buy up promising patents and store them away. It's all about profit, and if major manufacturers also hold significant shares of oil companies, both pockets flourish.

I also think alternative energy (solar, wind, geothermal, etc) would not be prohibitive if the demand was for millions of units instead of thousands, and IF there wasn't such a political force behind the"public" utilities. I believe whatever Greater Power there is, called God, Mohammed or whatever you believe in, gave us enough sun (heat, light) and wind, and the brains to develop the technology to harness it, that we wouldn't have to use up all the resources of this lovely planet we seem to be destroying so rapidly.

Ever hear of NikolaTesla? He figured a way we all could have free energy (we'll probably never know the full story), and look what our "society" did to him after they brought him to the US. There's No profit for the greedy, just for the masses, in free energy.

Sorry... this is an old soapbox of mine...

BTW, a good friend who works for Georgia Power tells me they have been working on fuel cell technology for some time now. (Personally, I think they will get into it as soon as they can figure how to control it and make a profit, LOL!!)

-darius

This message was edited Saturday, Jun 23rd 9:43 AM

Good thread, folks.

California deregulation was fundamentally flawed because it required the distributors to divest themselves of generating capacity and to buy energy on the spot market (which at the time was cheapest). So the spot market, rather than long-term contracts became much more important than in its former roll as "relief pitcher."

Today's NY Times reported that prior employees of San Diego electrical utility plant, bought by Duke Power, testified in Cal. legislature hearing that Duke worked to take down generating time so as to raise prices by removing spare parts and mis-operating the generators. Duke Power denies all.

Another point I wish to make: deregulation in the minds of conventional energy companies also seems to include restricting public funding of R&D in alternative energy solutions. Innovation is more likely to come from smaller companies focusing on new technologies than from traditional energy supply and distribution companies.

Daves right - competition should be good, and in the short term de-regulation buys you just that. Trouble is it dont last. De-regulation of any industry or service means that the original players (say 20) quickly get reduced to 10 due to competitive forces. Two years down the track mergers, takeovers and failures mean you are down to 5. Eventually it becomes 2 (market forces being what they are). Now the real war begins. Prices fall so low, nobody is making a profit - just relying on the Bankers to support them short term while they wipe out the only remaioning opposition. Inevitable result, down to one (in other words MONOPOLY). And prices - well guess what !! No, no, been there, done that, got the video.

El Tel

Dave, I was speaking from a consumers point of view, but TomK filled in with alot of thoughts that have crossed my mind.

TomK, you're right you did mentioned nuclear power. Sorry about that.

Marshseed, I looked at the NY Times on the web and couldn't find the article that stated Duke Power took spare parts, etc. I searched under Duke Power. Any suggestions?

Carol

Carol17:

NATIONAL
=========================
Witnesses Say Generator Cut Power Supply to Raise Price

Former workers at a Duke Energy power plant, testifying in theCalifornia Senate, said the company shut down production units to drive up electricity prices.
http://partners.nytimes.com/2001/06/23/national/23POWE.html?todaysheadlines

Marshseed, Your right about R & D more times then not new tech. comes from small co's. as a example here in Mich.
I quote from 2 articles in yesterdays local newspaper:

Power Co's have proposed to build 23 new "Natural gas-powered peaking plants" across the state. These plants will operate only when electricial use is at its peak on hot summer days. The cost will be added to consumers bill as a surcharge but to make their investments profitable the developers will have to bank on having hot steamy weather and high prices.

A little known Ann Arbor co. having raised $83 million over the last 10 yrs. has invented a relatively portable generator that turns Nat. gas,diesel,landfill methane gases,propane,solar energy,or even crude oil,into electricity. It churns out 25 kilowatts of energy a day - enough power to run 10 homes for 24 hrs. or heat 4 homes 24 hrs on a winter day. The units also can turn re-routed waste heat from boilers and other industrials machines back into electricity.

Now who is doing the more postive thinking here?