Wired - Or Tangled? (Letter to the Editor)

Wired - Or Tangled? (Letter to the Editor)

October 02, 2000
Originally published in Forbes

Today's monopoly electricity market is the result of conscious political design, not natural monopoly characteristics. A monopoly cannot sustain itself—and hardly is "natural"—if those who prefer not to partake of its services are free to leave. Electric utilities never achieved monopoly status before the advent of the state public utility commissions.

If regulation were devised to help consumers, prices should have fallen and the quantity of power supplied should have increased after the shift to regulation. Instead, customers paid more under rate of return regulation than they had under competition. Also, output of electricity fell following regulation, while utility profitability and return on assets increased. Seemingly, utility regulation did not fight monopoly or protect consumers, but created artificial monopolies that sacrificed the interests of smaller, competitive producers and their customers for the sake of politically powerful but less efficient electricity producers.