Back in the 1990s the new thing in energy was deregulation. The idea was that power companies ought to be able to buy electric power on a free-wheeling open market, reaping the advantages of competition. Generators of power would have to compete to offer electricity at low prices.
Luckily, Vermont politicians were not able to agree on an acceptable deregulation plan. Thus, the state avoided the debacle that followed when a deregulated energy market opened the way to business fraud of a historic dimension. California experienced brown-outs and skyrocketing costs, in part owing to the crimes of Enron.
Rep. Tony Klein, chairman of the House Energy and Natural Resources Committee, now thinks the state ought once again to think about opening up Vermont’s energy market to increased competition. He revealed his plan at a conference in Montpelier on Tuesday with some leaders of government and business alongside him.
Industry in Vermont is interested in finding a way toward lower energy prices, but others are wary of the dangers that have been amply demonstrated in the recent past. Vermont has many energy challenges, and price is one of them. But deregulation has not proven to be an effective way to meet those challenges.
Already competition exists. Producers of electricity compete to sell power to Vermont utilities, which creates pressure on them to provide low-cost power. One reason Entergy decided to shut down Vermont Yankee was that the price for the electricity it was producing from nuclear power had been undercut by the price of increasingly abundant natural gas.
Green Mountain Power dominates the energy market in Vermont; it serves 70 percent of the state’s customers. Thus, it is in the position of a near monopoly in serving Vermonters. That’s why Vermont has a Public Service Board, which regulates utilities, and a Public Service Department, which represents the interests of the public in cases coming before the board.
Regulation is not a sure way of protecting the public interest. Regulators may become cozy with companies they are supposed to be regulating. They may miscalculate. But in a regulated system, there is at least a public process allowing the public a voice.
Vermont has some cost challenges, but so does everyone else, mainly because of the push to free ourselves from carbon. In the near term, getting free of carbon will create new costs. One way to force a change to sustainable fuels would be to impose a carbon tax. This may be the most sensible solution to the energy problem (and the budget problem), and it confronts in a straightforward fashion the cost of switching away from carbon. But its straightforwardness may be its biggest disadvantage: People don’t want to admit that carbon is costly.
The cost may be confronted in another way: by paying higher costs for wind or solar power in order to introduce them into the market, where economies of scale will eventually bring the costs down. The higher costs of renewable power are really a different form of carbon tax. It is a burden we have to bear.
There are additional challenges. The state’s utilities have been forced to put a cap on the power they buy from small-scale solar installations because they have had trouble working the power into the grid. The economics of distributed power are also a challenge to the utilities. It would be unfortunate if the utilities concluded they needed to create a monopoly on solar power by refusing to take power from multiple sources, relying instead on their own solar sources.
Vermont has the good fortune of being near one of the world’s great hydropower resources — the province of Quebec. Low-cost hydropower promises stability for the state for years to come. Vermont’s utilities have already weaned themselves from power from Vermont Yankee. Policymakers ought to greet with a skeptical frame of mind the notion of opening the state’s energy markets to the Entergy-style manipulators whose interests reside far from the state of Vermont.
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