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River of de Nile on de regulation

April 5, 2004

Pardon my french. The governmental disinformation campaign on deregulation continues.

First there was the California energy crisis and now the northeastern blackout. According to this article in Newsday the final investigative report concludes that deregulation played a role in the Aug 14th blackout. As you can surmise from the article the “deregulation” consisted of non-profit oversight, forced purchases from independent power producers, and forced access to power grids. That doesn’t sound like deregulation to me. Nobody is building transmission capacity precisely because of these regulations.

From the article:

The investigators also blamed the Midwest Independent System Operator, a nonprofit organization charged with overseeing the reliability of the grid in that region, for its lack of awareness that day.

The final report added one new wrinkle to the analysis by conceding that deregulation of the energy business and the resulting increase in long-distance power trading probably played a role in the blackout.

In 1986, America's investor-owned utilities generated the majority of their own electricity, purchasing just 18 percent from other utilities and independent power producers, the report notes. By 2002, the portion purchased from outside suppliers had grown to 37 percent, the report says, necessitating a dizzying array of power transfers that sometimes span long distances.

Over the same period, the report notes, American electricity demand and generating capacity grew by 26 percent and 22 percent, respectively, while the capacity of transmission wires grew hardly at all.

"It is likely that the increased loads and flows across a transmission grid that has experienced little new investment is causing greater stress upon the hardware, software and human beings that are the critical components of the system," the report said.

The task force recommended commissioning an independent study of the relationships among industry restructuring, competition and reliability.

I wonder how long it will take the independent study to discover that there is no incentive to build transmission capacity if you cannot capture the profits from doing so? Of course the answer is never, since the purpose of such a study is to place blame on the market. As the saying goes, "De Nile ain't just a river in Egypt."

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