Perspective

The case against re-regulating the electric industry.

The California debacle has sent ripples across the country throughout the electric industry, building a wave of enthusiasm for re-regulation, and at just the time that policymakers have forgotten why they wanted to deregulate in the first place.

California itself is revamping its restructuring plan in fundamental ways without any clear vision of where it wishes to go. Elsewhere, it is doubtful that many other states that adopted restructuring plans will proceed in the way they would have if California had not imploded first. The policymakers likely will follow one of two paths: (A) Go ahead with restructuring, but with some safeguards to prevent the kinds of problems that have plagued California, or (B) Retreat to re-regulation of some kind.

As a short-term solution, re-regulation appears quite attractive. But that strategy overlooks the long-term failures of regulation.

We Could Return to the Status Quo

I admit that traditional, cost-based utility regulation appears to offer at least some obvious short-run advantages, given the current climate in California.