When Congress repealed the Holding Company Act, it gave states greater authority to regulate utilities. New Jersey picked up the baton and enacted rules to protect ratepayers.
Race to the Bottom
Two Eastern governors make war against markets.
At first glance, Maryland Gov. Martin O’Malley and New Jersey Gov. Chris Christie would appear as political opposites. Big city Democrat vs. suburban Republican. Classic liberal vs. conservative rising star.
Nevertheless, when it comes to electricity policy, these two unlikely bedfellows have launched twin crusades that could topple competitive energy markets in each of their respective states, and perhaps beyond. Despite the growth of consumer choice across the country, and despite the fact that new states are embracing the benefits of markets, Maryland and New Jersey are being led down a road that returns their citizens to the failed energy policies of the past.
Why are they doing this? It’s hard to say. In each case it appears to be a combination of politics, an incomplete understanding of how energy markets work, and a fundamental distrust of the consumer as shaper of his own destiny. Regardless of the motivation, the end result is the same. If these two states continue down this path, consumers will lose in the long run as state regulators sign them up for bad deals that will take decades to pay off.
Now I don’t mean to suggest that regulators in New Jersey or Maryland are devoid of wisdom. Quite the contrary; both New Jersey and Maryland have very astute regulators. They work arduously on behalf of their consumers. However, I question the common vision of an electricity market that has been embraced by their governors. This vision is forged by political opportunism. It promotes a myopic view of the public interest—a misguided belief that government is inherently wiser than its citizens.
Maryland’s ‘We Will’ Agenda’
In 2009, with great fanfare, Gov. O’Malley announced his electricity policy. In three succinct points, he told the world what he planned to do:
• “We will re-regulate Maryland’s electricity supply going forward when it is in the best interest of Maryland consumers.”
• “We will give the PSC the responsibility and authority to determine when new energy generation is needed, rather than relying on broken energy markets to make the determination.”
• “We will direct the establishment of new generation plants when it is determined by the PSC that an energy company is not developing a generating site due to private economic interests.”
Fortunately for the people of Maryland, Gov. O’Malley’s “we” didn’t include the general assembly of Maryland, which emphatically rejected the governor’s approach. That said, Gov. O’Malley hasn’t yet given up on his quest to be the “we” that controls the electricity market. Gov. O’Malley has consistently and vocally proclaimed his belief that a fully regulated and monopoly electricity industry is best for his state. He ran on such a