As Popeye would put it, I've had as much as I can stands, and I can't stands no more. As you may be aware, we are having a wee bit of difficulty out here in California just keeping the lights on day by day. And the groups that surely bear the largest portion of the responsibility for this "crisis" are the groups I've yet to hear blamed. Almost daily I get to hear and read what a mistake deregulation is, and how if he can solve this problem Governor Davis is a complete genius and might even be a U.S. President someday. The government is our friend, you see, and it alone can save us from the evil power companies, who would otherwise be gouging us until we cannot afford even food and water.
Since I get asked about the situation by virtually everyone with whom I speak who does not live in California, I thought I would save myself some effort and explain herein very simply (1) why fringe environmentalists and the government in California are largely responsible for our current situation, (2) why their policies have not only brought us to this crisis but have failed in their original intent, and (3) why deregulation is not the real foe to be feared. That's right: I blame radical environmentalists (note the qualifier; I highly support intelligent conservation, but none of the arguments I've seen show any signs of intelligence) and the California state government for the current situation, which was entirely foreseeable by anyone with half a wit. It was also entirely avoidable if only the people's interests and not those of politicians and radical leftists mattered anymore in American political decision making.
Deregulation, if we believe the popular press, is at the root of our present woes. If only the government had been the people's champion and kept those evil power companies at bay, none of this would have happened. That's what you get when you let a "conservative" like former Governor Pete Wilson occupy the office. Though in my book Pete Wilson was conservative like Bill Clinton was honest; i.e., only when it couldn't be avoided. It's a wonder we survived Wilson's tenure at all! That's simply a load of crap, and I'll explain why.
First, what happened wasn't deregulation in any proper sense. If an industry is deregulated then market forces are free to dictate outcomes. Deregulation is thought to be a good thing by its supporters because free and open markets encourage competition, which has been shown time and time again to be beneficial to the consumer. When the government of California "deregulated" the power industry, however, they quite literally did the most half-assed job that could possibly have been done. That is, they allowed market forces to rule only one half of the process.
To be more specific, the government of California allowed the larger companies who sell power to our local utility companies to charge whatever the market will bear. Thus, when supply outpaces demand, prices drop; when demand outpaces supply, prices rise. At the same time, however, the government of California left an entire body of regulations in place regarding precisely what the local utility companies could charge their customers. The problem is obvious.
Anyone with a fourth grade education in mathematics and the most cursory understanding of the law of supply and demand could have told you what would happen. The population of California has been growing at an incredible rate now for some time. And thanks to the environmentalist nuts who oppose the building of power plants—seemingly as a matter of principle in light of their lack of concern for any hard data—the state hasn't built a single new power plant in decades.
Think it through, dear reader. More people means more demand. The same number of power plants in situ means greater demand for power out of state. This means rising prices for the local utility companies. With the ever-so-intelligent state government imposing caps on what local utilities can charge their customers bankruptcy and crisis were not merely likely; they were outright inevitable.
The government of the state of California clearly did a terrible job of deregulating the power industry. The principles of deregulation themselves can hardly be blamed, however, insofar as they were not followed. To blame deregulation would be like blaming capitalism for Russia's current economic woes. Capitalism requires a certain set of shared values and infrastructure to work, neither of which Russia presently has. As such, true capitalism simply isn't happening yet. It may yet work for them given time, but it will require a number of changes that I doubt the present Putin administration could ever endorse. After all, such changes would require giving an unhealthy (read: hazardous to the health of high-ranking politicians) amount of power to the people.
So why did our elected officials do it? Can they really be that stupid? I honestly don't know the answer to that question. There are but two possibilities: (1) they displayed incredible ignorance, or (2) they were shrewd enough to realize that by half-assing deregulation our current problem would ineluctably occur and the government—the growth of which only further ensures their own job security, paychecks and perks—would have to be the hero of the hour, saving the people from the evil power companies. The former implies mere incompetence whereas the latter implies downright malicious intent. With politicians these days I'm inclined toward the latter, but I shall stick with the former out of charity. Whatever their intent, this much is clear: the government of the state of California has caused this "crisis" by ignoring the laws of economics and catering to radical environmentalist nuts.
Now, not only did the government fail insofar as it landed us in a mess which it (arguably) didn't intend, it failed quite completely as well at what it did intend. To be more specific, the stated purpose for leaving pricing controls in place on the local utility companies was to prevent rate gouging of consumers. In other words, the government's copious and beneficent wisdom dictated that the people of the state of California simply shouldn't have to pay more than some specific amount for each kilowatt-hour of electricity they consume. I guess these guys were sleeping when Jimmy Carter demonstrated just how well price controls worked during the so called "energy crisis" of the 1970's.
Does anyone else remember that peanut-addled oaf explaining that the Earth has, at most, 15 - 20 years of oil left? Almost thirty years later we're still here, and we're still pumping oil out of the ground. What's more, we've found a lot more oil along the way; so much so, in fact, that the last estimate I read was that we can now expect almost 100 years more at current consumption rates. As Bugs Bunny would put it, what a maroon.
At any rate, let's take a look at the results and see if the government at least succeeded in what they intended. As my wife read to me from the paper today, the average consumer can expect his power bill to climb by no less than 47% immediately. In the worst case, some unfortunate souls will see as much as an 85% immediate increase in their bills. Of course, I should point out that this comes on the heels of the ridiculous jumps we've seen of late that—get this—aren't considered rate increases because they fall under the category of "emergency procurement surcharges". Said surcharges have been necessary because our state government has been hemorrhaging money just to keep the lights on, buying a megawatt here and there from anyone who can spare it.
Ah yes, I am so glad the government got involved to prevent my rates from going up. Thanks to them, I've been paying ridiculous emergency procurement surcharges for a while—which are not rate increases, I'll have you know—and, what's more, I can now look forward to paying hugely increased rates in the near future. And, of course, that says nothing about the billions and billions of dollars in debt the local utility companies have incurred because of ridiculously stupid governmental policies. Gee, I wonder to whom said companies will turn for help with those debts? No doubt the government in its beneficence will help bail them out at some point with yet more dollars taken from my pocketbook in the form of new taxes, fees, or surcharges.
Naturally, does anything I've said get reported in the popular press? Of course not! The press, 80% of whom vote Democratic according to the last study I saw, never have a bad word to say about government, unless of course it's a government populated by Republicans or at least conservatives (sadly, the extensions of those two terms overlap only a bit these days). The press reports quite frequently about what an awful idea deregulation is and what a wonderful thing it would be if the state would just re-usurp control of our situation. Ah yes, that would be the same state that screwed things up in the first place, wouldn't it?
I can't tell you how "comforting" I find that suggestion. After all, government is the same set of institutions responsible for such winners as our perennially going-bankrupt social security, the never-competitive (and barely competent) U.S. Postal Service, Amtrak, etc. Of course, it also bears mentioning that not one word of bad press has been given to our environmentalist "friends", who have yet to meet a feasible power-producing technology they like. If anything is said of them at all, it's that at least they have the strength of their convictions and aren't "selling out" to the gods of consumer comforts—you know, those trivial things such as light, heat, etc.
I think the facts speak for themselves. If the government of the state of California had originally deregulated the power industry completely, then it is quite likely that our rates would have risen over the years. With more people moving into the state demand increases, and it is only natural that they would. But by letting the free market reign, it would have provided strong incentives for two very important things: (1) the building of new power plants—environmentalist nuts be damned—and (2) conservation. Not surprisingly, these are the two pillars upon which the plan to get us out of this mess rests. The difference, of course, is that it wouldn't have cost the people so much money and frustration in the process.
05/20/2001