Nothing's Shocking

Let me step into the debate over the BGE rate hike last year and its repercussions. Stephanie leads off, Maryland Conservatarian rebuts, and Bruce follows up.

It's helpful to remember the context in which the Parris Glendening and the General Assembly moved to deregulate the electric utility industry. 1999 was at the height of deregulation mania, when government at all levels was urged to privatize, outsource, or deregulate as many of their functions as possible. So it was not a shock to see even Democrats going along for the ride.

Seen from the point of view of today, of course, the deregulation fad may well be on its way to Macarena status. Whether you're talking about contractors in Iraq or the rushed privatization of social services in Indiana, the idea that substituting private entities for public ones would solve the problems of government now seems rather naive. Deregulation, while not precisely like government outsourcing, shares the same unearned faith in the ability of private enterprise to make government (and other public functions, like electricity) work better.

One could argue that Maryland went about deregulation in the worst way possible, by leaving on the rate caps. Possibly, although I would argue that some kind of cap would have been necessary in order to prevent Enron-style price manipluation (Atrios laid out the rationale for this a while back). Certainly, though, it could have been higher, enough to allow some competition in energy suppliers to emerge.

But that's the thing: every state that has done deregulation is facing higher electricity rates, either now or in the near future. Nor have the various efficiencies promised by deregulation -- more competition, improved infrastructure -- yet emerged. I suppose it may take more time, and more policy tweaking, to get to that point, but in the end I think there's a reason why electricity production is usually classified as a natural monopoly.

UPDATE: If you have the time, go check out the Baltimore Sun's gallery of articles on the BGE rate hike, especially the early ones.

Tags: maryland electric utilities deregulation