After 10 years of incentive regulation, reliability has declined in Ontario. Regulators failed to enforce service-quality standards, and consumers are suffering as a result.
May 15, 2001
Now Do as You're Told
Regulators count on price signals to force consumers to behave.
Boise, Idaho: Tues. Apr. 10, 2001, 8 a.m.
SENATOR CRAIG:* California is going to find that it, too, can conserve once the price begins to hit ... It will probably be the single greatest factor, that is price, that will help bring about the conservation that is necessary this summer. ...
MR. GIFFORD: I think price caps would be exactly the wrong move ... It would block the signal of scarcity. We're going to get the new supply on line, and we're going to get consumers to change their behavior consistent with that price signal.
MR. SCHAEFER: It's very difficult for me to sit here and understand what people mean when they talk about price signals. To the average consumer, there is no such thing as a price signal. It's actually price impact. ...
MR. HEMMINGWAY: We are convinced in Oregon that there is a point at which prices even at the wholesale level do so much damage to our utilities and our infrastructure and our economy, that involuntary curtailments are preferable. [V]oters can rise up and do something we don't consider rational, or appropriate, or good public policy, if we simply act and do what some people think is the right thing, which is to raise prices as rapidly as possible and send the right signal.
MR. GIFFORD: It's in the allocation of this scarce resource ... And usually, in our economy, we allocate the scarce resources through the price signal.
COMMISSIONER MASSEY: Can I ask you a question? Do retail consumers in Colorado see a price signal?
MR. GIFFORD: [W]e have average prices, and prices throughout the day are, of course, variable. And I see that as our first challenge to move forward toward more real-time pricing, so the price signal more clearly gets through. ...
COMMISSIONER BREATHITT: Do you have rate caps on the residential side right now in Colorado or rate freezes?
MR. GIFFORD: No, we do not. Well, I mean, through a series of different rate cases, rates are set at certain levels. But it's not a statutory rate freeze.
MR. KEELEY: Let me give you one sense of an order of magnitude what we're dealing with on the wholesale side, where the state has stepped in ... The equivalent of a gallon of milk going to $19 a gallon, or a loaf of bread going to $25 a loaf.
MR. HAMILTON: On the weekends I'm a farmer. And the farming community has a kind of supply and demand axiom ... there is no cure for high prices like high prices. Because what happens, of course ... you plant your barley up to the door step, and then the next year the prices drop again.
MS. SMITH: [I]s there a price at which you shouldn't buy? [M]y answer is yes.
Now, I don't know where it is. Our commission hasn't had a proceeding to do that. But I'm certainly willing on an incident-by-incident basis or utility-by-utility