As electricity demands increase this summer, The Pacific Research Institute (PRI) has launched a new website to encourage energy competition that leads to more affordability, innovation and climate change solutions.
The initiative is prompted by issues facing the nation overall, but California exemplifies the issues, Dr. Wayne Winegarden, PRI senior fellow in business and economics, told the Northern California Record by email.
“Efficient electricity generation is an essential good for a modern society, and yet we are seeing all sorts of problems creep in,” Winegarden said.
“Less efficient generation is causing families to pay too much for electricity. There are also unnecessary reliability issues that have all sorts of adverse consequences. As the nation becomes wealthier, we should be seeing an ever-improving electricity sector – just as we see the prices and attributes of many other modern technologies (e.g., televisions and computers) improving on a regular basis. The fact that we are not seeing these benefits is a sign that changes are necessary.”
Monopoly electricity suppliers have the wrong incentives when it comes to providing more innovation or more affordable service to business and residential consumers, Winegarden said.
“These utilities operate on a cost-plus model, which means it does not matter how much a monopoly provider spends – these costs can be simply passed along to customers, and often are,” Winegarden said. “The cozy relationship also leads to cronyism. For instance, in Illinois, the former House Speaker [has been investigated] in a bribery scheme where the utility (ComEd) [allegedly] steered $1.3 million in payments to Speaker Madigan’s associates in exchange for legislation that would have provided over $150 million in benefits to the utility.”
Competition could additionally lead to climate solutions, Winegarden said.
“There is a strong demand for low emission sources, but not at the expense of higher prices,” Winegarden said. “Competition enables generators to experiment with different sources, and through this experimentation process, discover better climate solutions. Bureaucratic monopolies experiment less, and when they do, it will typically be with only more conservative sources.”
Winegarden noted that competition would also require the energy generators to compete with one another to sell their energy into the grid.
“This means they can only earn higher profits by delivering ‘better’ electricity services – better defined as cheaper, more reliable, fewer emissions, or a combination of these factors,” Winegarden said.
Even before last summer’s rolling blackouts, Pacific Gas and Electric acknowledged that such events are expected to increase in the coming years, according to Forbes.
“It is important to note that in California, which has some competition, there are many regulatory burdens and mandates that worsens the wildfires problem and unnecessarily creates grid failures,” Winegarden said. “These burdens, such as expensive green energy mandates that divert resources from maintenance, need to be changed in order to meaningfully address the problems of worsened wildfires and grid unreliability.”
Regulatory changes would lead to a more effective competitive environment, enabling independent generators to discover power grid reliability solutions – especially important during high-demand summer months, Winegarden said.
“There are not only economic consequences, there are social consequences and health consequences,” Winegarden said. “A cheaper, more reliable grid will improve California’s competitiveness as a place to do business. It will also reduce energy poverty in the state which is harming too many families and is a factor helping to drive the state’s homelessness crisis. All of these problems can be reduced with a more reliable and affordable electricity system.”
