Deregulation and Free Markets in the power industry

In the last several months you must have seen the ads. They appear in the mailbox every week. “Switch to Electro-Juice and SAVE 10% on your electricity bills!” What is really happening is this:  Power Brokers (companies that produce nothing) have fought for and won the right to compete with our local generating station offering to sell you surplus power off the national grid.

Why is this bad?  Saving money is good, right?  Is it just me or has anyone else noticed that PSE&G (the company that services and runs the local generating station) hasn’t offered the same 10% discount? Why is that? It’s for the same reason that we hear in other industries all over the North-East. Salaries up here are higher and therefore it’s not cost effective to try to compete with energy generated down south.  So we don’t. We just shut down the generating station and become a power delivery company only. We just maintain the lines.  Their local monopoly was the only thing that kept local power generation afloat financially.

Now of course, we all believe in free markets right?  The free market will fix everything!  Here’s the thing.  When local high paying jobs are forced to compete with wages from other regions, the salaries don’t go down. They go away. The employees are terminated because nobody is willing to take a cut in pay.  

You may be thinking, hey it’s not my problem.  But consider this. Just what happened in California a few years ago? Why was it that suddenly they couldn’t generate enough power for the residents? What changed?  It wasn’t perhaps that a lot of older less profitable power generating stations went off line was it?  Unable to compete with grid rates perhaps? What happens when power brokers and speculators start manipulating amount of electricity available so they can increase demand and drive up the price. You think that after 5 or 10 years sitting dormant that PSE&G will just go over and fire up the local generating station?  No. By then it would cost millions to get that up and running again. It would be cost prohibitive to restore a generation station knowing that the price may just plummet again and make the investment impossible to recoup. Nobody would take the risk.   

I’m not a big fan of unions and I do believe in free markets. But allowing competition from outside the region is a bad idea.