Unclear on the Concept

When faced by a problem created by overregulation, the first inclination of Maryland’s venture marxists is to increase regulation.

Look no farther than electric power utilities and today’s Washington Post.

Maryland’s deregulation of electricity markets failed to deliver lower prices but instead led to rate spikes for millions of customers and left the state vulnerable to power shortages so severe that they could cause frequent brownouts, a highly critical report by state regulators concludes.

The Maryland Public Service Commission said in the report, released last night, that the excessive rates and threats to the region’s power supply are so dire that it must step in, using its authority to force utility companies to buy more electricity. The regulatory agency also plans to require utilities to implement an aggressive series of conservation programs that would, for example, reward customers with rebates if they turn off their air conditioners on hot days.

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Considering that deregulation of the market was never accomplished blaming deregulation for higher prices and shortages is a bit much. They correctly identify the problem:

Electricity prices rose for millions of residential customers this past spring, but high rates are only part of the problem, the agency says. Population growth, ever-larger houses with electricity-hungry gadgets, poor planning for new power sources and an aging, bottlenecked network of transmission lines have threatened the reliability of the power grid, the regulators say. With an expected 17 percent rise in demand from 2005 to 2016 and no major new transmission lines to move electricity from distant low-cost plants into Maryland, the state could be woefully short on power.

But there is nothing here that re-regulation is going to solve. In fact, one of the ideas floated by a rather expansive but slightly demented Public Service Commission Steve Larsen are really guaranteed to make matters worse:

The commission said it plans to regulate the market by forcing utilities to contract long-term with power companies, a change that it says would provide more electricity, force prices down and guarantee the industry a reliable investment.

How this helps anyone or serves any purpose other than a kneejerk reaction is anyone’s guess. Long term contracts are only beneficial when you are buying at the lower end of a price curve to offset future increases. At this point such a strategy is dangerous and could just as easily see Maryland’s consumers locked into higher prices. Of course, if you are the PSC and your stock in trade is creating hysteria to increase your relevance that is an attractive strategy.

Now that Governor O’Malley has eliminated a property tax exemption for electrical utilities any incentive on the part of utilities to build new generation capacity in Maryland — at a reasonable rate increase for consumers — is gone.

So we can look forward to the PSC foundering around to find statist solutions to statist problems and we can probably look forward to doing it in the dark.

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