| The Global Freedom Institute |
| Fight for power: Battleground California (page 3) This means that California's economy takes a very large impact in terms of costs as well as jobs. With democrats at the helm, knowing that people identify whome is in office for blame, not who caused the problem, the democrats get the blame. This has large implications. First, it makes inroads into a strong democrat power base in California for republicans. Second, it secures room for environmental regulation easing. Third, it opens space for more oil drilling and power company control of the state, for fear of shortages. What is the solution? Some would have us believe that it is in our best interests to take over power companies via state control. This would be detrimental in the long run. While it may resolve short-term issues, such as supply and pricing, it would not be a long term solution. First, government has rarely ever been successful in implementing programs without some level of corruption or waste. Second, government is not in the power business and would have to relearn all the mistakes that private business has already made and learned lessons from. Third, even if it works in the short-term, eventually government would see it as a means of income for the government and raise rates to help maintain budget balances or to increase spending on other areas. That means there is less stability of pricing depending on who is in office to control the state industry. Fourth, the cost of building those power plants would be put on the state adding spending to the state budget. This means taxpayers, yet again, foot the bill in both taxes and prices of energy. Some argue that we should subsidize the industry in California to keep it afloat and raise rates or eliminate rate caps. Subsidies in 1996 did not solve the problem. In reality, it only gave incentive for the industry to work for future subsidies only 5 years later. It sets a bad precedent for future subsidies. It also does not address competition, meaning it maintains consumer captivity, thus allowing a profit gold mine for companies and no protection for consumers. It is the worst of both worlds. No government cap to protect the consumers and no market forces to protect them either. The best solution would be one of pure market economics. There are two possibilities for this. First, and most preferable would be a federal government decision. President Bush should have his attorney general go after the parent companies in such a way that tries to break up the national companies into the state subsidiaries. If those parent companies are only out to siphon off profits and leave their subsidiaries in such a poor condition that they need government subsidies to survive and ignore the general welfare of the people, then it should be broken up as a penalty. If those companies have this much impact on the market that others cannot compensate for, then they should be broken up similar to other industries that control too much of the market. Pacific Bell's break up is a prime example of this. Even if this is not done, complete deregulation should be employed. This deregulation should include a choice for consumers to change power companies on a whim, similar to the long distance phone industry, leaving them free to choose. No local company should have domain over any consumer. This means sharing power lines. While freedom to choose your company is a great idea, no company can afford to put up new power lines all over their state or country. This means that the power lines may have to be siezed by state, and possibly giving the companies compensation for their power lines. However, those power lines have been paid for by consumers with their rates. Therefore, it should not be a "full cost" of the power lines that should be paid. Those lines should be opened to all power companies to use. That means consumers may change from any power company to another freely. This is a must. Local control is a flawed system. It prevents consumers from impacting the market and prices charged. Local areas hasn't worked with cable or power. Allowing fully open markets has worked with long distance services for phones, cellular phone pricing, and airline fares. All price caps should be removed. Companies can try to charge more, but with a competitor willing to come in and take their customers, they would have to react and lower prices as they lost consumers. A full deregulation approach would also eliminate incentive for subsidies since none would be given. It would eliminate incentive for creating a false shortage because another power company would be able to use it to take their customers away. It would promote power plant building in order to meet the needs of taking the consumers away from the competition. It would not threaten the environmental regulations due to the public relations impact of those violators. It may even serve to create stronger compliance with those regulations since people could change companies. It would prevent political manipulation because of the fear of competition taking profits with consumers. Even if the federal government did not go after the parent companies, full deregulation should occur in California in order to gain the advantages oulines above. Deregulation would create an invitation for other power companies to migrate to California to create more competition. It would also allow smaller companies to build a consumer base to grow and threaten larger companies to keep the larger companies in check. However, another halfway deregulation attempt without consumer choice and open access to existing lines would be doomed to fail, for the same reasons outlined above. 1 2 3 4 |