From the start of the electricity deregulation debate over 15 years ago we have warned policymakers that the fundamentals of electricity service the physics of electrons and the economics of electricity make it virtually impossible to create orderly retail markets that will benefit residential consumers. We have an open mind about the wholesale generation market and aggressively supported the Energy Policy Act of 1992. Unfortunately, in years since that Act became law policymakers made two fundamental mistakes. State policymakers pushed deregulation from the wholesale market into the retail market and federal policymakers failed, totally, to create an open and vigorously competitive interstate market. These mistakes are the root cause of the chaos in electricity markets across the country today.
Electricity is a vital commodity in a vulnerable market.
It cannot be economically stored, has no substitutes and requires perfect, instantaneous balance. The rigorous real-time physics of the electricity network make it susceptible to highly disruptive accidents. Surplus generation and transmission capacity are not generally available and take long lead times to build. Inelasticity and weather-sensitivity of demand make electricity prone to severe peaks and programs to rapidly shed load have not been developed. Premature deregulation led to profit maximization that tightened electricity markets by reducing supplies, limiting reserves, eliminating back up requirements, undercutting conservation programs, and preventing facilities from being built.