Saturday, April 14, 2007

In a BurkaBlog post about the House floor debate on electric utility regulation, de-regulation, and re-regulation the other day, Paul Burka makes an interesting observation:

The debate revealed the House's schizophrenic attitude toward deregulation: It wants to have its cake (a competitive market that ought to drive rates downward, but hasn't, except for big customers) and eat it too (by mandating lower rates).

He's right; the House (and the Senate, for that matter) is schizophrenic about deregulation. In truth, both bodies are divided ideologically into two camps. The deregulate-ors believe that the free market will solve all the problems. Then there are the realists.

Let's look at what hath deregulation wrought in Texas. In 1999, we deregulated electricity, with the aforementioned results: electric rates are still climbing across the board, and the only beneficiaries seem to be big customers (the HEBs of the world). In 2003, we deregulated homeonwers insurance, and we still have the highest homeowners insurance rates in the country as prices continue to climb.

There's a reason for these failures, and it's called The Illusion of Competition. Competition, that grear equalizer of a free market economy, is supposed to benefit all consumers across the board, but in practice that rarely happens.

NEWS FLASH NUMBER UNO: there will always be competition for the most attractive customers, whether that's big electricity consumers, Housewives of Orange County in their McMansions, or Little Old Ladies from Pasadena who only drive to church on Sundays.

NEWS FLASH NUMBER TWO-O: Not all of us are the most attractive customers.

NEWS FLASH NUMBER TREO: That's why there was state regulation of industries like electricity, telephones, banks, consumer lenders, and insurance companies in the first place. The goods and services they provide are part and parcel of modern civilized life, and so there is a public interest in ensuring fairness, access and affordability. That's the lesson that's been lost in the rush to deregulation that has characterized state and national policy for the last 25 years.

Most legislators, of course, live lives closer to Real Housewives than to Real Broke, so they don't even know what it's like to be paying 20 percent more for your auto insurance than the guy in the next zip code, or to see the number of retail electric providers willing to do business with you shrink year after year.

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