Power Rate Caps Expiring

Another example of why governments ought to stay out of the regulation of markets.

Centre Daily

The tiny Pocono Mountains borough of Milford was among the first to feel the pain from the expiration of rate caps that for a decade have insulated Pennsylvanians from paying the true cost of the electricity they use.

At Luhrs hardware store, the monthly electric bill shot up from $2,500 to $4,200 last year. A resident, Peter Regas, says his family's bills exceeded $1,000 a month last winter, compared with $200 to $300 in the past.

Milford's experience is a reminder that the competition that was supposed to result from the state's electric deregulation, keeping power costs affordable, never materialized. Now, with the expiration of the rate caps, millions of Pennsylvania's utility customers may be in for sticker shock.

It's astounding how that kind of leap of logic can be made. The state government has artificially kept the price of electricity below fair market value, and now that that lid is off, it's a surprise that rates jump?

Really?

The answer?

Wait for it.... go to Harrisburg for help.

Tribune-Review

U.S. Steel Corp. and Allegheny Technologies Inc. say their costs for power in Pennsylvania have climbed about 40 percent in recent years, since the state deregulated its electricity market.

Leaders of the two companies say the state Legislature needs to adopt a plan that once again will allow them to negotiate fixed-price contracts for longer than three years with power providers or local electric-distribution companies, such as Duquesne Light Co.

Gar! Why in the world does the state regulate the length of utilities contracts?! There are teams of business analysts and contracting personnel at the manufacturers and utilities who are more than capable of coming to equitable terms. If US Steel wants a 10 year deal for power, let them.

Why?

There is a bright side, however. Less power consumed means less air polluted. Yay environment! For the steel companies, it probably means less steel and less work and fewer workers. Yay environment!

Economics and Markets Posted by AlexC at May 29, 2007 1:08 AM