Four Big Mistakes in Deregulating the Electricity Industry

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Utilities Nachrichten

Power Generation,Grid,Electrification

When policymakers both here and abroad deregulated and restructured the electricity industry they made four big mistakes. And we are still living with them.

Number 1 The architects of deregulation, being economists, focused on market structure and operating savings when the big problem facing the industry was increasing capital expenditures and adjusting to climate change. They diverted attention from an existential challenge to achieve modest operating savings that rarely flowed through to consumers. They created markets that ignored externalities and equated customer welfare with the lowest price in tomorrow’s market.

They ignored noneconomic incentives, with the result that serving the public gave way to gaming the system for maximum profit. They thought that they could design a market that would function in a way to encourage investment, keep margins down and give the public a reliable product into the distant future. Unfortunately, whatever savings achieved by generation efficiencies appear to have been swallowed up by a rise in other costs or profits. Number 4.

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