Friday, October 21, 2011

Electric Slide

Many utilities in the U.S. have been operating as monopolies. Aspiring electricity providers have been barred, first by federal regulations, and then by certain states. There are only 15 states in the U.S. that provide customers with any form of choice when it comes to the provider. Texas is the largest electricity generating state in the country. In addition the state ranks number one in providing a choice when it comes to electricity. Half of all customers in Texas are eligible to switch electricity providers, and nearly 4 million, or 60%, have already done so. By allowing the customer to choose their provider the state has given rise to innovation and efficiency. In 2005 Texas achieved their goal of producing 2,000 MW (megawatts) of new renewable energy, four years ahead of their scheduled date, 2009. Continuing on the path of triumph Texas has raised the goal to 10,000 MW by 2025. Deregulation encouraged companies to invest in this new beneficial energy, and thus new companies such as Green Mountain Energy have emerged. Rates in Texas have trended downward, and are today at 11.28 cents/kWh, below the national average of 11.58 cents/kWh.
So with all of these benefits and savings why are the majority of U.S. utility markets regulated and monopolized? There are a few potential draw backs to a competitive market. Other than certain companies losing their power of monopoly the biggest factor is the direction that the market would go. As renewable energy becomes more reliable and efficient the cost will decrease. In the meantime it is still a very expensive energy to invest in. New companies that are rising in the renewable energy field require a large input of private capital. Government subsidies help to enable and encourage these companies to continue. If these subsidies were lost or decreased the market for renewable energy would take a large hit and slow the growth of the sector significantly. If this happens many companies in a free market would still strive to provide the cheapest energy source, and that resource would not be renewable in the case of a loss of government subsidies. Without the subsidies many companies take gracious financial offers from other countries such as China to relocate in an effort to attract more clean energy. If the budget is revised or changed and there is a loss of funds for subsidies not only will the private companies have wasted significant amounts of money, management time, and focus, the market could also take a fall back into non-renewable energy.
With that in mind does the U.S. stand to benefit from a competitive utility market with the current economy, or would that drive the country further into a reliance on coal and oil, and distrust of renewable energies.
--Caleb DeMario

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