CURRENT MOON

Sunday, March 12, 2006

We.Told.You.So


You know, to read the recent spate of articles about what a failure electricity deregulation has been, you wouldn't know that, at the time Enron and others were hyping this idea, a lot of people tried to explain that it wouldn't work. The articles always sound as if, gee, golly whiz, who'd a' thunk that deregulating an essential service for which there is an inelastic demand would have been a bad idea? Electrons simply aren't the same sort of commodity that, say, coffee beans or pork bellies or diamonds are. You can't store electrons when they're cheap and then use them when the cost goes up. They have to be produced pretty much in real time with demand, which goes up and down and can be somewhat unpredictable, given that weather can be somewhat unpredictable. Transmission lines can only carry so many electrons at a time and the farther away that you import the electrons from, the more of them that get lost as heat on the transmission lines. People can't do without electrons, nor can they substitute something else for electrons the way that one could, if necessary, substitute tea for coffee. Which is to say that there was a reason they regulated electricity back in 1935 and there's a reason that deregulating it in the 1990s made sense only if your name was Jeff Skilling.

2 comments:

QuinnLaBelle said...

About that satellite photo illustrating this post? It's gonna be real interesting watching it go dark(er), dontcha think?

And it will. Go dark(er), that is.

Anonymous said...

Inelastic demand with a monopolist as the supplier. Econ 101 tells you show that the monopolist is going to do very well.