A study by a coalition of Texas municipalities - the Cities Aggregation Power Project, whose members include San Angelo, Odessa and Abilene - says the state needs "meaningful reform" of its electric deregulation policies to compensate for what it calls generally higher electricity prices since deregulation began 10 years ago.

The power industry responds that the Texas Electric Choice Act of 1999 is achieving what it was meant to achieve - the replacement of regulation with "fierce competition" that not only enhances investment in new power sources but maintains downward pressure on prices.

Who's right?

A good way to think about the perpetual problem of energy prices is to recall that price regulation is a game governments play in order to appear protective of voters who also happen to be consumers.

Government just thinks it knows a commodity's right price.

In fact, only the marketplace knows, through the experience of buyers' collective choices.
Charge too much and buyers flee. Charge too little and demand explodes, and companies quickly realize they are leaving profits on the table. When the market sets the price and supply meets demand.

The Texas Legislature's decision to get rid of regulated power prices and encourage competition among suppliers of power was utterly sound. (The municipalities don't disagree)

Unfortunately, backers of the deregulation bill, including then-Gov. George W. Bush, who signed it, encouraged voters to believe passage of the bill would lower prices.

Nice thought. The trouble is, deregulation isn't about low prices; it's about accurate prices - prices that reflect the realities of supply and demand.

Sometimes deregulation leads to higher prices for some and lower prices for others. That's because a price-controlled system always undercharges - and, hence, subsidizes - some groups and overcharges others. Or the price controls are set so low that no one benefits and rationing and shortages ensue.

Now, it's true that deregulation, when there is strong competition, often leads to lower prices, especially in the long run. But more importantly, it leads to adequate supply.

Politicians are misleading the public when they claim that deregulation will definitely lead to lower prices. And they are misleading the public once again if they claim that re-regulation will solve those pricing problems.

Bill Murchison
http://www.gosanangelo.com/news/2009/mar/07/bill-murchison-deregulation-not-about-low-prices/