British price cap regulation quickly became the international gold standard for regulation. It looked so simple. But if the purpose was to provide a dramatically different and less expensive...
Lighting Up the World
Why electricity is good—and more is better.
“Electricity ushered in a transformation of American society at the end of the 19th Century. Suddenly, the backbreaking work that consumed dawn to dusk for most Americans was alleviated by electric motors, dynamos, and generators. Electric household appliances made it possible to heat homes, cook food, store meat and perishable items, and wash clothes without the drudgery and fear of disease that had haunted previous generations.”—Ohio Department of Public Utilities, 2009 1
As the sine qua non of modern society, electricity is essential to gains in quality of life, economic well-being, and a cleaner environment. The demand for power will ascend accordingly as the modernization process continues amid global population and economic expansion. The International Energy Agency (IEA) reports that the world is on pace to consume over 38,400 terawatt hours (TWh) in 2030, compared to 21,160 TWh in 2010 and an incremental increase almost four times greater than what the United States will consume this year. 2 Unfortunately, this massive 82 percent increase in power generation will not nearly be enough. The IEA also projects that 1.2 billion people will still lack electricity in 2030, a “shameful and unacceptable” 14 percent reduction from today. 3 Conservation and efficiency programs, while vital to a modern economy, have distinct limitations. In the 2009 study, Assessment of Achievable Potential from Energy Efficiency and Demand Response Programs in the U.S. (2010-2030), the Electric Power Research Institute (EPRI) found that domestic electricity consumption will grow by 0.68 percent per year even under “conditions ideally conducive to energy efficiency programs.” 4
Despite the recognition that electricity is the cornerstone of a modern industrial society, the United States confronts a policy gridlock arising from internecine conflicts of competing groups determined to stop the general development of particular technologies ( e.g., coal, nuclear) or the specific development of particular projects ( e.g., wind, hydro, gas pipelines). To be sure, most of these groups give lip service to the importance of electricity, but they frequently fail to mention the crucial advantages of a diversified electric power system—where the whole is greater than the sum of its parts. At the same time, there is a visible but insidious movement to raise the price of energy to reduce consumption, propel progress toward meeting climate change goals, or fit a social agenda promoting lifestyle change. According to Carl Pope, then executive director of the Sierra Club:
“Indeed, the widespread implication that the key policy needed to reduce carbon dioxide emissions is a price on carbon does reinforce the notion that the most important things needed to solve the climate crisis are higher energy prices and lower consumption.” 5The assertion that raising energy prices to reduce demand is a societal positive, however, runs counter to experience. Higher prices have adverse socioeconomic and public welfare impacts, notably a disproportionate effect on low income households. Econometric studies have shown that rising