Attorney Edward L. Flippen insists it "doesn't take an economist to figure out" what will happen to electricity prices in a restructured industry that provides for open access and retail wheeling ("Radical Restructuring? Not in My State," Perspective, August 1996, p. 11).
Forgoing an economist, Flippen predicts that electricity rates will reach a national equilibrium point substantially higher than rates currently prevailing in Virginia but below rates in California. Therefore, he reasons, Virginia's electricity consumers will lose while those in California will win. QED: Electricity restructuring is evil and should be rejected.
I suggest Mr. Flippen needs not only an economist, but an accountant as well.
The win/lose scenario envisioned by Mr. Flippen and others who oppose a market-based system of competition in electricity would make sense only if the generation portion of the industry were constrained. With a finite, limited amount of electricity available, GenCo managers naturally would seek the highest rents available and send their electricity there, or raise local prices to the national market-clearing price.