Electricity Fairness Act [debating]

[tpfkaw]

This is some pretty basic stuff, guys.

[tpfkaw]

Well, actually, the reason why there is so little competition in electric utilities is that back in the "progressive" era, and continuing until today, many municipalities passed laws declaring electrical power to be a "natural monopoly" and therefore giving legal monopolies (occasionally oligopolies) to electrical utilities in exchange for a yearly fee or tax.  Not only did this give them the power to charge consumers with monopolistic prices, they also could pass on the entire cost of said fee or tax onto consumers, raising rates still higher.  Electrical utilities, of course, lobbied (and lobby) heavily for the passage of such laws.  One wonders - if electrical power truly is a "natural monopoly," why would electrical utilities ask for legal protection against competition?

As for nationalized electrical power, the government, of course, can sell power at any rate it wishes.  This is not because it has somehow figured out some way to create power more efficiently or cheaply than the market (my town, which has the worst of all corporatist worlds, has a substation owned by the town and power lines owned by utilities - the workers at the substation all receive between $200,000 and $240,000/year - not cheap!).  The reason why the government can sell power or anything else at any rate is because it, unlike a private company, can sell things at a loss and make up the difference by taxing people more (which creates its own deadweight loss).  Furthermore, there's an additional deadweight loss in this instance - power generation has an important negative externality (environmental damage caused by the burning of coal or natural gas - even if one is sourcing one's power from non-emissions sources that's still preventing other places from using those non-emissions sources for their power).  Charging an artificially low rate for power will cause this negative externality to grow, along with the deadweight loss (environmental damage, in this case).

Whatever the case, price ceilings are absolutely never in any scenario a good idea, and it is an iron law that a binding price ceiling will cause shortages (in this case, blackouts).  Hugo Chavez has been finding this out in Venezuela.

[tpfkaw]

Yes, Hugo Chavez put binding price controls on power in Venezuela.  Unsurprisingly for anyone who understands very basic microeconomics based on deductive mathematical logic, there have been blackouts in Venezuela, ridiculous as that may sound.  Otherwise, I'll be content to quote myself:

As for nationalized electrical power, the government, of course, can sell power at any rate it wishes.  This is not because it has somehow figured out some way to create power more efficiently or cheaply than the market (my town, which has the worst of all corporatist worlds, has a substation owned by the town and power lines owned by utilities - the workers at the substation all receive between $200,000 and $240,000/year - not cheap!).  The reason why the government can sell power or anything else at any rate is because it, unlike a private company, can sell things at a loss and make up the difference by taxing people more (which creates its own deadweight loss).  Furthermore, there's an additional deadweight loss in this instance - power generation has an important negative externality (environmental damage caused by the burning of coal or natural gas - even if one is sourcing one's power from non-emissions sources that's still preventing other places from using those non-emissions sources for their power).  Charging an artificially low rate for power will cause this negative externality to grow, along with the deadweight loss (environmental damage, in this case).

[tpfkaw]

If you have a binding price ceiling, there will be a shortage.  That isn't really debatable.  It is in fact a mathematical surety that a binding price ceiling will cause a shortage.  It is as sure as 2+2 equaling 4 that binding price ceilings cause shortages.  To argue otherwise is the equivalent of saying that 2+2 = 5.  Now, it may be the case that in certain places there have been price ceilings imposed, and the price has in fact fallen to the price ceiling without shortages.  But this is not because binding price ceilings work, but rather because the price ceiling isn't actually binding - that is to say that electricity is already being sold at above free-market equilibrium rates.  Why would this be?  I addressed this in my original post:  Many municipalities have granted legal monopolies to a single utility, shielding them from market competition.  When there is a binding price ceiling, as in Venezuela, there are shortages.

It is certainly possible that Hydro-Quebec turns a yearly profit.  But what is not considered on its books are the original expenses of creating the dams that Hydro-Quebec runs, which was an enormous expense that a private company would have to bear itself.  Nor are we considering the cost of the deadweight losses incurred by the taxes which paid for those dams.  Nor are we considering the deadweight loss created by the enormous ecological devastation that damming a river causes.  These deadweight losses are borne by the ordinary citizen, not the government, and so will never appear in its record-books.  Nor, for that matter, does Atlasia receive any significant portion of its electricity from hydropower.

[tpfkaw]

No, actually my posts are filled with substantive examples and well-reasoned explanations.  However, I am a bit at a loss with someone who is actually denying known facts - that a binding price ceiling creates a shortage.  That is day 3 or 4 of Microeconomics 101.  It is not a difficult concept to grasp.  The dumb jocks who couldn't tell a budget constraint from an average cost curve get it.  So yes, nuh uh.  Mathematical facts are mathematical facts are mathematical facts.  If you are not understanding me you can literally read the Wikipedia article on price ceilings: http://en.wikipedia.org/wiki/Price_ceiling

[tpfkaw]

Problem is, when greater retail choice is introduced, prices go up even more. Not down. Facts are pretty cool.

Are you seriously trying to be a self-parody here?