Tuesday, November 6, 2007

Energy Deregulation's Hidden Virtue?

The electricity market was once highly regulated (e.g. prices set by government commissions) on the grounds that utilities are natural monopolies. In recent years, a number of states have de-regulated their energy markets.

The result? Higher prices. The NY Times reports:
Retail electricity prices have risen much more in states that adopted competitive pricing than in those that have retained traditional rates set by the government, new studies based on years of price reports show.
Of course, if there are negative externalities associated with electricity consumption - i.e. global warming-causing carbon emissions - higher prices are a good thing! The de-regulation acts like a stealth carbon tax (except no revenue for the government). Ahh... now I realize that all the politicians, "free market" types and energy lobbyists who pushed deregulation were engaged in a conspiracy to help the environment (no wonder Cheney kept those meetings secret!).

The Economist's Free Exchange blog makes a similar point here.

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