Perspective

Ten ways to fix the mess in electric restructuring.

Crisis in California! Double-digit increases in Maine's default service rate! Wholesale prices up to $6,000 per megawatt-hour! Independent system operators struggling to get the market to work! In the background, we hear strains of that old Gershwin tune: "Let's call the whole thing off."

Electric restructuring is struggling. Many would write it off as a failure. But we cannot turn back. Mergers are a fact. Power plants have been sold. To be sure, some regions have done little as of yet, but they will be forced to do so eventually. We need to step back, learn the lessons from the first phase of restructuring, and make it work.

Here are the most important lessons we've learned since passage of the Energy Policy Act eight years ago.

1. Accept the High Price. Too frequently, politicians insist that restructuring should produce savings right away. But that's not our economic system. Instead, it should be enough to ask only that competition will dictate the price of electricity, just like for any other product. That price, whatever it is, will certainly prove more efficient than any "just and reasonable rate" that regulators may devise.

As California has shown, you cannot expect restructuring to work miracles when demand outstrips supply. Instead, trust competition to send a price signal that will encourage power producers to build more generation—the kind of signal that, if sent earlier, could have made a real difference by now.