Governance for Networks: Regulation by Networks in Electric Power Markets in Texas

from the book Regulation and Economic Opportunity: Blueprints for Reform

Executive Summary

Most electricity consumers across the U.S., whether households or businesses, have limited choices when it comes to their electricity supplier. In many places consumers have no choice at all. Yet in Texas consumers can choose between dozens of suppliers and sometimes as many as 200 different plans. In this chapter, environmental economists Michael Giberson and Lynne Kiesling compare how Texas’s electricity market provides much more diversity of choice than other states. That variety of electricity service options allows consumers to choose a plan that better matches what they want, whether that is a variable pricing system or greater levels of clean electricity. Drawing from institutional economics, they suggest reforms that can open up other states for competitive electricity supply. These reforms include:

  • Quarantine the monopoly to the electrical wires and lines.
  • Create a platform where different electricity generators, known as retail electric companies, can compete for consumers.
  • Design electricity markets that allow prices to vary without political interference so that the market process can reveal which providers win in the “survival of the fittest.”
  • Policymakers should apply simple consumer protection rules as they do in other sectors that emphasize providing information about different plans to consumers.
CGO scholars and fellows frequently comment on a variety of topics for the popular press. The views expressed therein are those of the authors and do not necessarily reflect the views of the Center for Growth and Opportunity or the views of Utah State University.