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Businesses Power The Almighty Buck United States

How the Free Market Rocked the Grid 551

sean_nestor sends in a story at IEEE Spectrum that begins: "Most of us take for granted that the lights will work when we flip them on, without worrying too much about the staggeringly complex things needed to make that happen. Thank the engineers who designed and built the power grids for that — but don't thank them too much. Their main goal was reliability; keeping the cost of electricity down was less of a concern. That's in part why so many people in the United States complain about high electricity prices. Some armchair economists (and a quite a few real ones) have long argued that the solution is deregulation. After all, many other US industries have been deregulated — take, for instance, oil, natural gas, or trucking — and greater competition in those sectors swiftly brought prices down. Why not electricity?"
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How the Free Market Rocked the Grid

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  • by DarkVader ( 121278 ) on Friday December 24, 2010 @07:31PM (#34662626)

    No, the solution is MORE regulation, not less.

    The rates need to be regulated, and the private companies need to be taken over by nonprofit public organizations.

    Every time deregulation is tried, consumers get shafted.

  • Airplane tickets. (Score:4, Insightful)

    by flogger ( 524072 ) <non@nonegiven> on Friday December 24, 2010 @07:32PM (#34662632) Journal
    Yeah, Look at airplane tickets and how much they have gone down...
    Or better yet, Phone companies! My bill is as low as... Egads! It isn;t. Help!
  • Deregulate? (Score:2, Insightful)

    by Anonymous Coward on Friday December 24, 2010 @07:34PM (#34662644)

    You mean like Wall Street or Enron?

  • by Russ Nelson ( 33911 ) <> on Friday December 24, 2010 @07:40PM (#34662682) Homepage

    There are no free markets. There are only markets controlled by governments and markets controlled by customers. The markets controlled by customers work out pretty well for customers. The markets controlled by governments work out pretty well for governments and the politicians that run them and the lobbyists who fund them and the corporations who make money because the politicians control the markets in their favor.

  • by Russ Nelson ( 33911 ) <> on Friday December 24, 2010 @07:43PM (#34662710) Homepage

    There is no such thing as deregulation. Markets are regulated by their customers. The only way to get deregulation is to NOT regulate by government, and yet force the customers to buy anyway. And gee, that's exactly what happened in California when it deregulated.

  • by GigsVT ( 208848 ) on Friday December 24, 2010 @07:44PM (#34662718) Journal

    A free market is one controlled by customers.

    Just because the authoritarians have redefined "free market" to mean "laws to benefit corporations with government help" doesn't mean that the original concept no longer exists.

  • by GigsVT ( 208848 ) on Friday December 24, 2010 @07:46PM (#34662728) Journal

    The IEEE publishing a political editorial like this really discredits them as a professional organization.

  • by damburger ( 981828 ) on Friday December 24, 2010 @07:53PM (#34662774)

    ...a market for electricity will ensure nobody goes without electricity, presumably by the same process by which a housing market ensures nobody is homeless and an international food market has caused an end to world hunger.

    The ideologues are back with a vengeance. After all that has happened, after the finance system collapsed (and showed that it wasn't really made of anything substantial in the first place) how can anyone still listen to market fundamentalists?

  • by diegocg ( 1680514 ) on Friday December 24, 2010 @08:08PM (#34662850)

    The regulation vs deregulation discussion is stupid. There are things that need to be regulated (banks shouldn't be allowed to play casino with my money) and there are things that need to be deregulated. Good politics is about choosing wisely between them. Dumb politicians who claim that regulating/deregulating everything will solve all problems only mess everything up.

  • by gethoht ( 757871 ) on Friday December 24, 2010 @08:12PM (#34662880)
    Just look at all the "innovation" that companies like Enron brought to a deregulated energy market! Let's ask California how well that worked out for the average consumer. While we're at it we can look at deregulatory laws like the Commodity Futures Modernization Act and the repeal of Glass-Steagal that enabled such "innovation". The "free market" for oil is now run by speculators who can buy and sell contracts for millions of barrels of oil but never have to take delivery, creating false demand and squeezing millions of dollars a day from average americans as they have to pay over $3.00/gal to fuel their vehicles. What else has deregulation done? How about all those nasty little unregulated derivatives such as MBS(mortgage backed securities) that imploded the world economy? That's financial "innovation" like the world had never seen before. All thanks to deregulation, yay!
  • by hedwards ( 940851 ) on Friday December 24, 2010 @08:14PM (#34662886)
    I'm sorry, but you're wrong. What you're describing is a well regulated market. Definitely not a free market. Adam Smith was quite clear that a free market will lead to the sorts of behaviors that the GP was complaining about unless somebody steps in and puts in place regulations which prevent it.
  • by geek ( 5680 ) on Friday December 24, 2010 @08:17PM (#34662914)

    For the same reason "life isn't fair"

    As long as 1% of the total population controls 90% of the wealth, there is no such thing as competition or free market capitalism.

    I like competition and I dislike government intrusion but there is a reason FOR government and that is to protect it's citizens, that includes protection from economic crimes as well as physical ones.

    The middle class is shrinking regardless of which ideology is popular that month. People are losing their homes left and right, jobs are going over seas and yet still so many people are ignorant to the real issues.

    Deregulating natural monopolies doesn't solve the problem. It just hands a blank check to a corporation chosen by the government to fuck it's customers however it chooses.

    Free market is an oxymoron to anyone that actually understands what the two words mean.

  • by dave562 ( 969951 ) on Friday December 24, 2010 @08:18PM (#34662924) Journal

    How do you use the terms "free market" and "force competition" in the same thought? Are you sure that YOU understand "free market"? A free market is a market free from regulation, of any sort. In a FREE market, companies are FREE to tack on whatever fees they want.

  • Re:Uhh... (Score:5, Insightful)

    by causality ( 777677 ) on Friday December 24, 2010 @08:36PM (#34663010)

    From TFA:

    Such arguments were compelling enough to convince two dozen or so U.S. states to deregulate their electric industries. Most began in the mid-1990s, and problems emerged soon after, most famously in the rolling blackouts that Californians suffered through in the summer of 2000 and the months that followed. At the root of these troubles is the fact that free markets can be messy and volatile, something few took into account when deregulation began. But the consequences have since proved so chaotic that a quarter of these states have now suspended plans to revamp the way they manage their electric utilities, and few (if any) additional states are rushing to jump on the deregulation bandwagon.

    Yeah, so, how about not continuing this experiment with our critical infrastructure?

    Not to mention that a business which a) has extremely high barriers to entry and b) is inherently a monopoly was never going to have much of a "free market" to begin with. Of course trying to force it to act contrary to its nature, by fiat, is only going to create problems.

    As far as wisdom and foresight go, this is bottom-of-the-class material here.

    It's amazing that there is so much debate about this. If you take a hard look at this debate, it's the same old story every time. It just gets rehashed every now and then as though it were a new issue, as though this "debate" were covering new ground. The truth is it never moves forward. It moves in circles. Really, how hard is it to understand that natural monopolies are not fertile ground for free-market principles?

    I'm all for free markets. I want them to succeed. This one can't. The reason electrical service has higher prices, lower service, outages, and other problems when you try to treat them like free markets is because they are not free markets. You will never have an electrical free market until it becomes cheap, reliable, and cost-effective for each home to be "off the grid" and generate its own electricity. Until we come up with that kind of technology, we're going to need local monopolies to deliver electricity to us. Because monopolies are inherently abusive, they need reasonable regulation and close scrutiny.

    Please can we stop presenting this as a new and interesting issue? It's neither. It's more like an algorithm that produces the same results each time it iterates.

  • by shutdown -p now ( 807394 ) on Friday December 24, 2010 @09:27PM (#34663244) Journal

    Ah yes, the universal "not really a free market" argument. It usually goes like this:

    The free markets are the solution to any economic problem! The more you deregulate, the better of you are!

    Random dude:
    Um, but then why, all the times we tried to deregulate, it became worse? *points out specific cases*

    That's because those still weren't free markets - you haven't deregulated enough!

    Random dude:
    So can you give some examples of real free markets then?

    No, the evil government backed by jealous socialist mob always cracks down on us. But you just trust me, when we actually get one, it'll be totally awesome for everybody.

    As someone else recently said to Slashdot, libertarians are the guys who, if you ask them how to get out of a pit, tell you to dig down. If you dig for a while, and ask them how come the exit is farther than it were, they'll tell you that you haven't dug deep enough.

  • by gtbritishskull ( 1435843 ) on Friday December 24, 2010 @09:40PM (#34663294)

    You free market nuts are just like the communists. You claim that your system is the best but there are tons of examples where it has failed but none of where it has succeeded. I would ask you why you expect that it would work differently this time, but I know what your answer would be. You would point out in all the failures how it didn't follow your "perfect" free market system. Communists do the same thing (Russia did not follow the ideal communist model). The fact is that if your system does not correct itself, then it is a bad system.

    Here is a metaphor for you... You can balance a ball on top of an upside down bowl, but if you push it just a little bit off of its "perfect" position then it will tumble off of the bowl. While the ball can stay balance at the top of the bowl forever, it will only stay balanced if it is in its "perfect" position. On the other hand, if you turn the bowl the other way around and put the ball exactly in the center of the bowl, it will stay there. But, if you give it a small shove, it will move back towards the center of the bowl. If your system cannot deal with imperfections in implementation, then it is useless. It has to be able to deal with corrupt politicians/businessmen, crashes in the stock market, and just people being stupid. Show me where your system has succeeded and I might give your argument some credence. But the only argument that you have is to have "faith" in your ideology. I prefer science.

  • by Anonymous Coward on Friday December 24, 2010 @09:54PM (#34663374)

    It's actually worse than this - especially in the US. The arguments for and against government regulation are moot - because the US Government no longer represents its people. Republican and Democrat are simply two "models" of the same structure which is ultimately beholding to those who put them there. It is they who use the lobby industry to make sure the laws that are passed ensure they can continue to gather more power and influence to themselves while stifling any real competition. Do you really think the people actually running the US care if they are paying Republicans or Democrats? In the end, they will always get their way - whether it's the repeal of any government controls on the finance industry to the rorting of the Patent system to the endless trough feeding of the military machine.

    I think it's great to have a discussion on regulation - but when the government regulations themselves are enacted to support the power elite, then - what does it really matter - the result is the same.

  • by Rising Ape ( 1620461 ) on Friday December 24, 2010 @10:13PM (#34663474)

    I'm sure they won't like the comparison, but it's very reminiscent of Marxists and other far-left groups saying "The Soviet Union/Mao's China/Pol Pot's Cambodia weren't truly communist". This pattern is quite common amongst ideologues of various descriptions, both on the left and right.

  • by sjames ( 1099 ) on Friday December 24, 2010 @10:18PM (#34663502) Homepage Journal

    There are also markets controlled by cartels. That's what happens when barriers to entry are high and government regulation is lax.

  • by burnin1965 ( 535071 ) on Friday December 24, 2010 @11:03PM (#34663680) Homepage

    the free market would degrade into monopolies and become based on greed if left unregulated

    Very true and a proven principle over and over again. Unfortunately, markets like electrical power generation are susceptible to the greed factor due to the virtual impossibility of end consumers using their wallets to regulate with natural market forces. Governmental regulation is absolutely necessary to have a viable electrical power market supplying consumers and industry.

    Case in point, is the California electricity crisis [] that stemmed from naive deregulation of power generation and unnatural manipulation of the market to raise prices. Of course there are many that claim it failed because the price hikes were not propagated to the end consumers but this is a crock because the end result would not have been an end to the manipulation it would have meant many consumers would have to do without electricity, many businesses would go out of business due to costs, and those who could pay would be stuck paying artificially high prices due to the concerted manipulation by Enron and power generators to increase their profits. It turned into a greed driven market even though there were "competing" power generators.

  • by Fantastic Lad ( 198284 ) on Friday December 24, 2010 @11:59PM (#34663854)

    It doesn't matter what course you choose to take. If you leave the psychopaths in positions of power, then whatever system is used will only lead to further misery.

    These problems can only be solved by the recognizing and removal of non-humans. I'd start at the banking level, remove the psychopaths from that system, undo usery, and then work down.

    If the ability to experience empathy is a pre-requisite before one can be considered human, then Psychopaths are not human. They are a predator population which has embedded itself at the highest levels of power and social control. If you want to treat them kindly, then that's fine, but whatever happens, they need to be removed from their positions or we will continue to live in a state of war, poverty and misery.


  • by node 3 ( 115640 ) on Saturday December 25, 2010 @03:24AM (#34664476)

    What was the worst thing about California, it was regulation that brought about the shortages that caused the price spike. Retail prices were fixed. Fuel costs went up. Unprofitable generation went offline for for repairs, maintenance, or upgrades, or simply shut down.

    This was followed by a mild heat wave. The result was rolling blackouts as the cheap efficient sources were inadequate. New generation and transmission was not built due to lack of profit.

    That sounds like an argument for government involvement, not against. If power generation and transmission is a responsibility assumed by the government, then the government can do things a private corporation is loathe to do. It can build out capabilities ahead of, and in excess of, present demand, and it can run at a loss over periods of time as necessary.

    Also, the recall era brown-outs were deliberate political ploys intended to raise public ire sufficient to support a recall of Governor Davis. Had the private utilities ran at a loss (perhaps with public subsidies, like we currently do with farms in the US, for the exact same type of reason), the brown outs would have been significantly less widespread.

    The problem isn't that private corporations are efficient, the problem is that they are far too good at being efficient and don't know when efficiency should give way to the service of the public well being.

  • by PeakPerformance ( 1964996 ) on Saturday December 25, 2010 @07:08PM (#34667444)
    Read more history. Look up Pinochet and the "Chicago boys", read Chomsky, or if that's too dense for you than "Shock Doctrine" will cover the topic nicely. []

Marvelous! The super-user's going to boot me! What a finely tuned response to the situation!