PolicyBlog has moved!

Thank you for visiting, PolicyBlog has a new address.

Our new location is http://www.commonwealthfoundation.org/policyblog

Please adjust your bookmarks. Archived posts will remain here for now.


Friday, May 15, 2009

High Costs of State Regulated Electricity

Like many states, Montana experimented with restructured electricity markets. However, at the bidding of Public Service Commissioner Ken Toole, the state re-regulated the industry. Now, the Commission is expected to approve the construction of a new natural gas power plant, despite the fact that it will increase electricity rates by up to $50 per year for the average homeowner. The Commission did not accept competing bids, which might have provided a lower cost to consumers.

Admitting that the power is more expensive than market prices, the commissioners believe it is still better to have a regulated industry. According to Toole:

This is what all of our decisions are like. You end up saying, 'I know this is expensive as hell. But, what about the market? You don't know what it will be.'
There are many legislators in Pennsylvania who agree with Toole, preferring to pass on above market costs to consumers from political handout contracts and unfunded mandates.

Legislators cannot ensure low electricity prices through either restructuring or government regulation. However, it can create a more competitive environment and educate consumers as to why electricity choice is important.

Click here for a related commentary on electricity deregulation.

No comments: