Electric Deregulation Filled with
Promise and Perils
Prior to "deregulation," electricity was supplied by regional monopolies that owned both the power plants and the transmission lines for the distribution of power. The California legislature set the rate of return of profit for the utilities, and the state Public Utilities Commission planned for future power needs and helped insure that rate increases were fair and based on the "cost of service." While this system was often abused because of the enormous political power of the electric utilities and their ability to influence policymakers, it did keep in check the profiteering that we are now witnessing.
Electricity "deregulation", as these changes in the industry are referred to, has been driven by ideology and vested interests. Ideologues argued that electricity was a business and that as such it should be left to the private sector. Private electricity companies saw an opportunity to make money from electricity sectors in various parts of the world. Large industrial electricity consumers saw an opportunity to use their market power to get cheaper prices for electricity in the new markets. In addition, management consultants have earned large sums of money for their advice and studies on how to restructure and privatize electricity sectors. The public was routinely promised that deregulating electricity would foster competition and this in turn would improve efficiency and service, innovation and lower prices. Politicians were promised that privatization would increase government revenue and that, in an open electricity market, investment capital for electricity infrastructure would be provided by private investors. Few of these promises were fulfilled.
Here are some facts to be considered in the Electric Deregulation in the Phil:
- Deregulation does not work because Philippines did not deregulate enough.
- Deregulation will lower costs for consumers.
- Prices for electricity are being driven up because the demand for electricity is increasing.
- The problems are being caused because there is not enough power to supply California
- Deregulation is good for the environment.
- Philippine's utilities are close to bankruptcy, it will be hard to gather funds
In addition, because a speculative electricity market is inherently volatile, and because some suppliers have an alarming amount of market power, a larger reserve margin of power is necessary. The independent power producers are using the uncertainty of the market to push for relaxing environmental regulations, to drill for natural gas in sensitive areas and to build more power plants and more transmission lines.
Electricity is an absolute necessity that should not be a speculated product. Consumers have a right to affordable energy, produced in the most environmentally sustainable fashion possible. But, when treated as a speculative commodity, the cost and supply of electricity becomes uncertain. This situation invites price-gouging and profiteering, as we are witnessing today in the Philippines.
We must critically analyze the intentionally perpetuated myths by the proponents of deregulation, because it is clear that what many pro-deregulation politicians are saying just is not true. We need to carefully look at their assertions, or we will not only continue to bailout utilities, we will higher prices, less reliability, and a threatened environment. It is time to hold policymakers accountable for the mess they have created, and roll back dangerous electric utility deregulation schemes.
Conclusion:
Electricity is an absolute necessity that should not be a speculated product. Consumers have a right to affordable energy, produced in the most environmentally sustainable fashion possible. But, when treated as a speculative commodity, the cost and supply of electricity becomes uncertain. This situation invites price-gouging and profiteering, as we are witnessing today in the Philippines.
We must critically analyze the intentionally perpetuated myths by the proponents of deregulation, because it is clear that what many pro-deregulation politicians are saying just is not true. We need to carefully look at their assertions, or we will not only continue to bailout utilities, we will higher prices, less reliability, and a threatened environment. It is time to hold policymakers accountable for the mess they have created, and roll back dangerous electric utility deregulation schemes.
