Idiocy of Deregulation

By Nathan Newman

From tpmcafe.talkingpointsmemo.com

July 18th, 2008
Okay, markets are really useful in many places; but the ideological
propaganda that weakening regulation on powerful economic actors will help
consumers has been proven wrong time and again-- the recent subprime mortgage
meltdown only being one example. Another is electricity deregulation that swept
many states in the 1990s and early part of this decade. The result-- well let's
let the socialist Wall
Street Journal report ($$$) talking about another fine product of George W.
Bush back when he was governor of Texas:

Texas had some of the cheapest power rates in the country when
it zapped most of the state's electric regulations six years ago, convinced
that rollicking competition would drive prices even lower.

This summer, electricity there is some of the nation's
priciest..."We could end up doubling last year's power prices," says
Dan Jones, who monitors the market for the Texas Public Utility Commission..

When then-Gov. George W. Bush signed the state's deregulation
bill in 1999, he assured that "competition in the electric industry will
benefit Texans by reducing monthly rates and offering consumers more
choices."
Actually, according to the Wall Street Journal, the problems have a lot of
similarities to the subprime mortgage mess: consumers were sold on what sounded
like sweet deals, only to see market changes lock them into high-priced
products that they could no longer afford:

Like homeowners unaware of the risks of an adjustable-rate
mortgage, some consumers didn't realize how wildly their bills could vary if
they chose plans tied to the market. Steve Schwantes, a Round Rock resident who
was laid off last winter from his job as a finance manager at Dell Inc., just
got his June utility bill and expected it to be similar to his May bill for
$189. Instead, it was $488.

From California blackouts to spiking prices in
other deregulation states, manipulation and poor information by consumers has
meant that deregulation has made things worse for consumers in those
states.  Between 2002 and 2006, prices in regulated markets rose an
average of 21%. In deregulated markets, however, prices soared by an average of
36%.  While Texas
state government is currently too ideologically rightwing to reverse course,
other states are abandoning large aspects of electricity deregulation:

Last fall, Governor Blagojevich signed a $1 billion electricity-rate relief package to provide consumers with relief
from the large increases. The utility restructuring legislation, SB
1592, also abolished the reverse auction program and replaced it with a
new state agency that will purchase power on behalf of the state's two largest
utilities..In Ohio,
stakeholders are negotiating how to end competitive pricing. Virginia's legislature last year passed
a law to abolish their competitive market and restore
the state to full cost-of-service regulation by the State Corporation
Commission..

Electing new leadership in Washington is a good first step, but the
real challenge will be to clear out the ideological trash of three decades of
mindless deregulatory wisdom and neoliberal economics.   Despite failure
after failure, it's quite amazing how resistant many leaders are to admitting
it's failure.  But as the old saying goes, when you're paid a lot by
special interests to not understand something, then it's very hard to change
those leaders minds.   But we all need to keep working at it.