Demand Common Sense

Abstract

By the time this article is published, it will be time for post
mortems on the “great energy legislative fix” of 2000. One may have a
certain confidence that however substantial or modest or non-existent
that fix may turn out to be, it will be at best ameliotory and likely ad-
dictive (i.e., necessitate more fixes to come).
The reasons are simple: Deregulation is not as great a thing in the
electric industry as it has been (at least by some key criteria) in other
formerly regulated industries. To the extent deregulation is going to be
made to work, the key lies in the substantial physical revamping and
upgrading of the grid on a national basis and emphasis on demand
management breakthroughs. While the best aspects of the proposed leg-
islation would create a better regionally based infrastructure to oversee
“reliability,” it at best offers an improved long-term institutional ap-
proach to a market that is physically discontinuous.
A key data point which supports this observation is the great price
cap war currently raging. Regulator after regulator in the Deregulated
States of America now has sought to address the summer shortage and
price spiking phenomenon by one of the most ancient of means: fiat,
California has been the most visible battleground.