Let consumers go green by choice

By Nick Dranias
Goldwater Institute
 
Arizonans are facing down a speeding locomotive of utility rate hikes. This runaway train is fueled both by increasing demand for electricity and by regulation that forces utilities to generate electricity from costly sources. Worse, the current system of state-sanctioned electrical utility monopolies ties consumers to the tracks–giving them no choice but to pay whatever rates are forced upon them.
 
It doesn’t have to be this way, the free market can be unleashed to minimize the pain. Arizona can open up its electrical grid to competition. Opening the grid would let innovative entrepreneurs fulfill the demand for all types of energy, including renewable, green energy. For example, once the electricity market in Texas was restructured for competition, generation capacity increased by 35 percent and much of that was through renewable sources.

By letting entrepreneurs sell electricity from renewable sources to environmentally-minded consumers, competition shifts the costs of green policies to green consumers, keeping rates lower for everyone else. Although the Texas market is still evolving and rates have not yet fallen overall, in Britain’s more mature market, a similar expansion in capacity driven by competition eventually lowered overall rates by 30 percent.
 
Electrical utilities should compete for your-hard earned dollar just like every other business.  And when they do, your rates will stabilize and ultimately go down.
 
Nick Dranias holds the Goldwater Institute Clarence J. and Katherine P. Duncan chair for constitutional government and is the director of the Institute’s Dorothy D. and Joseph A. Moller Center for Constitutional Government.


Comments

  1. Not only have ‘rates not fallen’ in Texas they have risen significantly above the national average. The one exception being if one is lucky enough to live in certain areas in Texas that have not been opened to ‘free markets’ – in those areas rates are significantly lower than in the ‘free market’ regions.

  2. Nick Dranias says

    Texas has had aggressive renewable mandates since 2004 that, combined with rapid demand, are responsible for the spike in aggregate rates. There is every reason to believe the same thing would have happened under a monopoly system you apparently espouse. But the great news is that by giving consumers the same choice they expect in all other markets, the cost of renewables is increasingly born by consumers who want to pay the premium associated with green energy retailers. The shifting of that cost to such consumers in free market areas is the real reason why the monopoly region’s rates have remained somewhat lower (“significantly” is debatable). By contrast, we will have no choice here, when the cost of renewable mandates starts to be felt and we see 5-10% rate increases on a regular basis in the coming days. Moreover, the beauty of a free market in electricity is that higher prices attract capital investment from entrepreneurs! Eventually, enough new capacity is built to stabilize and reduce rates by increasing supply. What, exactly, do consumers get out of the higher rates charged by our monopoly utilities? Nothing but what comes out of the generous hearts of the executives who run those monopolies and, often, the opportunity to pay for bad investments by those companies.

  3. I don’t ‘espouse’ a monopoly system but a regulated public utility system.

    Texas went from having rates below the national average to rates well above the national average. I would call that significant. It would be honest to state as such instead of claiming the market is still ‘evolving’ after ten years and rates have not fallen ‘yet’ as if it is assured they will.

    Oh, did I mention Enron …..?

  4. I don’t understand how it’s better to have a dozen small regulated companies in a market rather than one big one. Unless you’re a lawyer, lobbyist, or staffer at the Corporation Commission. Regulation is regulation.

    Try to balance property rights acquired over a long period of time with power rates and you’ll end up with a big headache.

  5. I believe in Free Market “Green” technology. Of course, I believe that a market is a place where the public purchases a product. What you are pushing is a “Green” distribution system where everyone in a geographical must pay the up-charge for “green” technology. That is not a Free Market.

    When I go to the grocery store, I can choose to purchase “green” products – which is ALWAYS more expensive or I can spend my money on the national brand – which is almost ALWAYS the second highest in cost, or I can purchase the “store or generic” brand which is the least expensive. That is a Free Market.

    For APS, SRP, TG&E, etc to be forced into making 15% of their power production with “green” technology, the consumers will be the ones using the “green” – greenbacks.

    If you want to “save the earth” and the “green” in your pocket, advocate for the completion of Palo Verde, which was designed for six reactors. With the advances made in that industry, we could eliminate other more expensive alternatives and get an even lower “carbon footprint.”

Leave a Reply