Full Version: Regulated deregulation
I have been trying to think how I could debate this subject since it has me so stinking mad!
BGE, that is Baltimore Gas and Electric co. was "deregulated" and I will use that term ever so lightly, back in 1999, long before I was a Maryland resident. Part of the deal to "deregulate" was to regulate a rate freeze at below the current 1999 rate for 6 years. The other part of the "deregulation" was to regulate that BGE could no longer own and generate the power themselves, only buy it, sell it and deliver it.
Well now comes June 30th 2006 and the freeze on rates is up, and the BGE customers, I being one of them, has been told we will face a 72% pay increase. This puts us at about double what our two neighboring states/districts pay - VA/DC.
We have a plan being offered by the MD legislation that offers yet another rate freeze, I guess since the last one worked so well, but customers will have to pay interest on the rates deferred for 10 years
The MD Governor called a special hearing yesterday and is said he will Veto that bill, but the legislation has enough votes so it is veto proof. Would be a political move more than anything.
Here is a page our paper has put together with a whole mess of articles regarding this issue.
http://www.baltimoresun.com/business/bal-b...iness-headlines
PS
We have a Republican Governor and a predominately Democratic legislation.
Do you think government deregulation such as the above example is in the interest of the consumer? As in the freeze on rate hikes etc.
Do you feel it is business friendly and encourages competition?
How or what went wrong with MD's plan?
BGE, that is Baltimore Gas and Electric co. was "deregulated" and I will use that term ever so lightly, back in 1999, long before I was a Maryland resident. Part of the deal to "deregulate" was to regulate a rate freeze at below the current 1999 rate for 6 years. The other part of the "deregulation" was to regulate that BGE could no longer own and generate the power themselves, only buy it, sell it and deliver it.
Well now comes June 30th 2006 and the freeze on rates is up, and the BGE customers, I being one of them, has been told we will face a 72% pay increase. This puts us at about double what our two neighboring states/districts pay - VA/DC.
We have a plan being offered by the MD legislation that offers yet another rate freeze, I guess since the last one worked so well, but customers will have to pay interest on the rates deferred for 10 years
The MD Governor called a special hearing yesterday and is said he will Veto that bill, but the legislation has enough votes so it is veto proof. Would be a political move more than anything.
Here is a page our paper has put together with a whole mess of articles regarding this issue.
http://www.baltimoresun.com/business/bal-b...iness-headlines
PS
We have a Republican Governor and a predominately Democratic legislation.
Do you think government deregulation such as the above example is in the interest of the consumer? As in the freeze on rate hikes etc.
Do you feel it is business friendly and encourages competition?
How or what went wrong with MD's plan?
Do you think government deregulation such as the above example is in the interest of the consumer? As in the freeze on rate hikes etc.
Government regulation of the private sector is never in the interest of the consumer. It is only in the interest of special interest groups who believe in the redistribution of wealth as well as the demolishment of big business to level the playing field for their local businesses. Government is a tool by which both special interest groups and big business are able to influence law making decisions that they shouldn't have power over. What would happen if government decided not to get involved any more and stop the regulation? In the long run the consumer would benefit greatly. The problem is that the government hardly ever thinks long term. Big businesses would no longer be able to use government to hinder competition and hurt entrepreneurs from entering the market and small businesses and special interest groups would not be able to hurt corporations by putting unreasonable strangleholds on their growth.
Let the consumer decide what is in their own best interest instead of politicians and special interest groups deciding for them. We the consumer should tell government that they shouldn't have the power to take away choice from the consumer. But politicians have elections to win and special interest groups have causes to serve, so its unlikely to change until the people are firm in their stance.
Government regulation of the private sector is never in the interest of the consumer. It is only in the interest of special interest groups who believe in the redistribution of wealth as well as the demolishment of big business to level the playing field for their local businesses. Government is a tool by which both special interest groups and big business are able to influence law making decisions that they shouldn't have power over. What would happen if government decided not to get involved any more and stop the regulation? In the long run the consumer would benefit greatly. The problem is that the government hardly ever thinks long term. Big businesses would no longer be able to use government to hinder competition and hurt entrepreneurs from entering the market and small businesses and special interest groups would not be able to hurt corporations by putting unreasonable strangleholds on their growth.
Let the consumer decide what is in their own best interest instead of politicians and special interest groups deciding for them. We the consumer should tell government that they shouldn't have the power to take away choice from the consumer. But politicians have elections to win and special interest groups have causes to serve, so its unlikely to change until the people are firm in their stance.
lederuvdapac, you're speaking from a Liberterian ideological viewpoint. If Government had not created the monopoly in the first place, then Government regulation would be a bad thing to implement. Now over the long run, in a truly deregulated market that is, some competitor could come along and generate nuclear energy for a discount compared to coal. But we are talking long term as in years.
What went wrong is that the Maryland Government forgot to break up the monopoly that it created. Economics 101 dictates that any Monopoly will charge the maximum of what the customer will bear, explaining that 72 percent price increase. And sure enough, Bucket didn't get a 72 percent better service either. The real problem is that politicians don't understand Economics 101. If the politicians did understand the economics of the Power Utilities business, Bucket might have gotten a 10% discount for his electricity. As the old saying goes, if aint broke don't fix it.
What went wrong is that the Maryland Government forgot to break up the monopoly that it created. Economics 101 dictates that any Monopoly will charge the maximum of what the customer will bear, explaining that 72 percent price increase. And sure enough, Bucket didn't get a 72 percent better service either. The real problem is that politicians don't understand Economics 101. If the politicians did understand the economics of the Power Utilities business, Bucket might have gotten a 10% discount for his electricity. As the old saying goes, if aint broke don't fix it.
leder what special interest groups?
This deregulation that occurred was so forcibly managed and in fact regulated by the government of MD, I am not entirely sure how they still can call it "deregulation". They told BGE not only what price they had to sell their energy at but they also told BGE it was no longer allowed to produce energy.
The idea was BGE would sell all it's power plants and then buy energy from the new owners at the lowest bid. Yet the government had already determined the price rate by setting below market levels. What do you think that did to competition?
As a result BGE sold most of it's power production plants to it's parent company Constellation. It has also been revealed, after huge amounts of pressure to release the info, that over 70% of BGE's energy will in fact be bought from their parent company.
As a customer I have no choice. BGE, since "deregulation" is still the only utility company delivering to homes in my area. The only other option we have is to call BGE and ask for our account to have a different power generator deliver to our home, but with over 70% of BGE's supply coming from her parent company, the amount of competition, if we can even call it that, is limited.
And who else would want to compete here in MD? You have to deal with BGE's ultimate control of the industry and the government's stranglehold, not to mention the constant political changes and restrictions that it tends to scare companies off.
This deregulation that occurred was so forcibly managed and in fact regulated by the government of MD, I am not entirely sure how they still can call it "deregulation". They told BGE not only what price they had to sell their energy at but they also told BGE it was no longer allowed to produce energy.
The idea was BGE would sell all it's power plants and then buy energy from the new owners at the lowest bid. Yet the government had already determined the price rate by setting below market levels. What do you think that did to competition?
As a result BGE sold most of it's power production plants to it's parent company Constellation. It has also been revealed, after huge amounts of pressure to release the info, that over 70% of BGE's energy will in fact be bought from their parent company.
As a customer I have no choice. BGE, since "deregulation" is still the only utility company delivering to homes in my area. The only other option we have is to call BGE and ask for our account to have a different power generator deliver to our home, but with over 70% of BGE's supply coming from her parent company, the amount of competition, if we can even call it that, is limited.
And who else would want to compete here in MD? You have to deal with BGE's ultimate control of the industry and the government's stranglehold, not to mention the constant political changes and restrictions that it tends to scare companies off.
Who is their right mind would equate price caps with "deregulation"? Who would equate limiting a business' activities to a limited area "deregulation"?
The same thing happened in Ohio. They separated the natural gas suppliers from the natural gas deliverers. Somehow this was supposed to create competition by allowing the deliverer to solicit bids from several companies and provide a lower delivered price.
This illustrates why price caps simply do not work, ever. The price cap kept competition out of the market for the last decade. Now, when the price cap is lifted, the price is raised back to the market price and customers are shell shocked.
What they should have done is eliminate the monopolies and let the free market decide the price. Let customers choose their supplier, but not their deliverer (due to the infrastructure requirements). It is too late to revisit the bone-headed decisions of the past, so the plan going forward should be to ramp up the price from the current below-market-rate level to the real price demanded in the marketplace. Which seems to be what the legislature is trying to implement.
Do you think government deregulation such as the above example is in the interest of the consumer? As in the freeze on rate hikes etc.
It seems to be in the best interest of all the parties, although it is an imperfect solution. Raising rates too quickly will lead to many defaults and service shut offs as customers fail to adjust to the new cost of electricity. This will lead to many people without power or a huge financial quagmire for the company to try to sift through.
The same thing happened in Ohio. They separated the natural gas suppliers from the natural gas deliverers. Somehow this was supposed to create competition by allowing the deliverer to solicit bids from several companies and provide a lower delivered price.
This illustrates why price caps simply do not work, ever. The price cap kept competition out of the market for the last decade. Now, when the price cap is lifted, the price is raised back to the market price and customers are shell shocked.
What they should have done is eliminate the monopolies and let the free market decide the price. Let customers choose their supplier, but not their deliverer (due to the infrastructure requirements). It is too late to revisit the bone-headed decisions of the past, so the plan going forward should be to ramp up the price from the current below-market-rate level to the real price demanded in the marketplace. Which seems to be what the legislature is trying to implement.
Do you think government deregulation such as the above example is in the interest of the consumer? As in the freeze on rate hikes etc.
It seems to be in the best interest of all the parties, although it is an imperfect solution. Raising rates too quickly will lead to many defaults and service shut offs as customers fail to adjust to the new cost of electricity. This will lead to many people without power or a huge financial quagmire for the company to try to sift through.
QUOTE(lederuvdapac @ Jun 21 2006, 09:44 PM) 
Government regulation of the private sector is never in the interest of the consumer.
I understand your zeal for laissez faire, but when anyone uses absolutes like "never", alarms start going off in my head.
The easiest argument to prove incorrect is an absolute statement, to do so you just give a counter example and the argument is knocked down.
Here's an instance where gov't regulation actually is in the best interest of the consumer. Regulatiing dumping toxic wastes that contaminate water and soil are in the best interest of the consumer....unless the consumer lives far from the area of the dumping.
There are situations where the market is not the answer. I'm not prone to giving absolutes like "the gov't can solve all our problems", but there are definately instances where gov't intervention and action are needed and benefit consumers as well as society.
QUOTE
RedCedar
Here's an instance where gov't regulation actually is in the best interest of the consumer. Regulatiing dumping toxic wastes that contaminate water and soil are in the best interest of the consumer....unless the consumer lives far from the area of the dumping.
Here's an instance where gov't regulation actually is in the best interest of the consumer. Regulatiing dumping toxic wastes that contaminate water and soil are in the best interest of the consumer....unless the consumer lives far from the area of the dumping.
This is not the issue here and Amlord is right. It is the JOB of the government to regulate the disposal of toxic waste and any number of other things. Their job in this case is also to insure full competition and a “level playing field” for all competitors. That done the free market will set the price and it will nearly always be lower than any “regulated” price. I cannot think of a instance where this is not the case can you?
The issue here sounds like what the morons in Calif. Did with their energy companies. They sold it off and then “set” a price (low) and based it on the buy price of electricity at the time. They also did not allow the, now independent company, from entering into a long term contract to insure supply at a price that would allow for a profit at the “fixed” price. The rest is history. The price of electricity went up (supply) and the price was fixed. This = BIG losses.
Price controls always, every time without fail, lead to shortages. Even politicians cannot violate the law of supply and demand for long.
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