Politically Inelastic?

Deck: 

Electric pricing issues are hard to overcome.

Fortnightly Magazine - March 15 2002
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Do politicians really mean what they say when they call for competitive markets in electricity at the wholesale and retail levels? Rivals of California Gov. Gray Davis champion competitive electric markets. But what if, after elections, California markets are then fixed (with unanimous consent), and prices continue to be high? Will that politician still stand behind competitive markets?    

How about economists? I attended a late January conference by the environmental group Resources for the Future where I spoke to Shirley J. Neff, staff economist for the Senate Committee on Energy and Natural Resources. 

She was telling the audience that in essence, price volatility was a national security issue and that states should be given the power to mandate power plant construction.

I stopped her to ask about the philosophy-that price should be left free to be a market signal to indicate when power plants should be developed? Looking wounded, her answer was in effect, "remember California." I didn't get a chance to ask her by what criteria states would mandate plants, if not by price. Most panelists at that conference, however, agreed that the regional nature of power markets and short duration of price spikes does not qualify it as a national security issue.  

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