Irwin M. Stelzer is to be congratulated for a generally fair and clear overview of the advantages of electric-utility deregulation and the obstacles standing in its way.
However, he appears to accept the argument that the so-called “stranded costs” with which utilities could be stuck under some plans are the simple residue of bad management decisions. In fact, the debts and contractual obligations that would put those utilities incurring them into a serious competitive disadvantage (if no transition period is included in a deregulation plan) are largely the fruit of decisions forced on the industry by U.S. presidents, Congress, and government regulators.
Therefore, these government-driven decisions cannot be dismissed as off- handedly as some would propose, like our friend Rep. Tom DeLay. Stranded costs are distributed very unevenly among utilities in different states, and each state tends to view them differently. Some, like New Hampshire and California, are dealing with them right now. Others are planning to do so over the next few years as they move toward deregulation.
An appreciation of what is now occurring at the state level is essential to any understanding of the future prospects for electric-utility deregulation. Congress will continue to talk about a national deregulatory regime — a sort of one-size-fits-all plan that ignores the vast differences in electric markets in various states. Meanwhile, the states are moving to solve transition problems and to give electricity customers the benefits of competition at the retail level.
Stelzer touches on this, but then seems rather cavalierly to dismiss those of us who support a state-based effort. It is quite true, as he suggests, that any real deregulation will require some congressional action. But it does not follow that Congress should have primary responsibility for coming up with a comprehensive national scheme that ignores the differences among the states. Such a federal model has not worked in countless instances over the past four decades.
It has been our position from the beginning that Congress ought to get rid of the monsters it has created — like the Tennessee Valley Authority and federal power marketing authorities. That done, Congress ought to clear away the regulatory and statutory underbrush that stands in the way of the states. And, rather than write new mandates, Congress ought to get out of the way and let the marketplace take its course.
If Congress does these things, the states will move even faster than they are moving now. And diverse paths will converge to create a national free market, with all the attendant benefits.
LOAD-DATE: March 5, 1998
LANGUAGE: ENGLISH
GRAPHIC: Picture, no caption
Copyright 1998 The Weekly Standard
