Saturday, August 16, 2003

An Industry Trapped by a Theory: Market failure in the power utility world

An Industry Trapped by a Theory: "In the search for the source of Thursday's blackout, the underlying cause has been all but ignored: deregulation. In principle, deregulation of the power industry was supposed to use the discipline of free markets to generate just the right amount of electricity at the right price. But electric power, it turns out, is not like ordinary commodities. "

It's hard for markets to price reliability, and in a competitive environment it is exceedingly hard for any corporation to invest in something that its customers cannot measure and do not value.

I suppose we could respond to a fully deregulated power marketplace by making individual quality investments, such as purchasing a home generator. That doesn't help with keeping the street lights on.

Nuts. Regulation has a place.

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