Why deregulation failed

Use this link to get back to this page. Why deregulation failed in banking. Author: Lawrence J White. Date: Spring From: Journal of Retail Banking Vol. Publisher: Thomson Financial Inc. Document Type: Industry overview. Length: 5, words. Translate Article.

Set Interface Language. The market can be used to produce needed goods and services, but the idea that markets and civilization itself can survive without rules is absurd idiocy. Texas this past week was a case in point. The electric grid in Texas is built for efficiency, but it is not built for climate resilience. The quest for efficiency and low cost led to under-investment and energy facilities poorly prepared for cold weather.

Texas does better in hot weather, but climate change is altering weather patterns and extreme weather events are becoming more common. While we need to mitigate climate change and will need government-driven public policy to do that, we must also adapt to the climate change that is already underway.

That need to adapt also requires a more active government presence than the ideologues running Texas want to allow. Energy is not the only industry damaged by uncontrolled market forces. Health care is also suffering from the impact of health insurance companies on hospitals and medical care.

The shortage of intensive care beds during the COVID pandemic can be traced to efforts to enhance cost-effectiveness in hospitals. Extra capacity is considered waste that must be reflected in the price of care. Eliminate that capacity and costs can be reduced. Instead of paying for and storing extra personal protective equipment, hospitals utilize just-in-time supply chains to meet immediate needs. The system worked well until a pandemic hit and the supply chains could not meet dramatically increased demand.

I am not arguing against just-in-time production or global supply chains, but rather for adequate public investment in infrastructure and supplies to meet the needs of emergencies. Deregulation has been successful in New York, Virginia, and Ontario by protecting the customers from price volatility by price caps.

By definition, price caps are not effective in a deregulated market, however, a price cap i. The price caps can be removed at a later date when the deregulated industry has matured like the power market in New Jersey.

Circumstances like the August 14th, blackout in the northeast of the United States not caused by deregulation brought industry uncertainty to investors and consumers. Under deregulation, dispersed power generation such as co-generation, biomass, microturbines, solar photovoltaic cells, wind turbines, fuel cells, geothermal, and diesel generators is being promoted vigorously and more prominence is being put in the ancillary services and FACTS devices because of shortage of transmission lines in a deregulated power market.

Today, about 25, people in the state get their power from competitive suppliers. But if the rationale for this controversial effort was to save folks money, then this deregulation policy has failed. In response to this outrageous transfer of wealth, Gov. Ned Lamont recently signed legislation that tries to make it harder for these competitive suppliers to rip people off.

This is why my organization is calling on the Connecticut General Assembly to once and for all pass legislation to end competitive supply. This deceitful marketing typically offers a promise of savings, but locks customers into unfavorable agreements that mean they pay more for electricity than if they had stayed with their local power company. For full disclosure, I work for an organization that is made up of consumer advocates, electric utilities, former lawmakers — Democrats and Republicans — and organized labor committed to exposing the risks of deregulation.

The facts are clear: deregulation allows competitive energy suppliers to overcharge their customers and take advantage of low-income families by saddling them with higher electric bills. The General Assembly should end competitive supply once and for all.

His commentary originally appeared in The Connecticut Mirror www.