Economic Theory and Some Disobliging Aspects of Electricity Trading and Deregulation

  • Ferdinand E. Banks


The main purpose of this note is to make a few up-to-date remarks about electricity deregulation. As things have unfortunately turned out, instead of reducing the price of electricity, the deregulation of electricity has often resulted in escalation. Recent examples of this phenomenon are Sweden and the state of Montana in the US, where prices suddenly spiked to record levels, and then stabilized at twice the original price. (The Montana deregulation failure was examined in considerable detail on the well-known news program "60 Minutes"). Of course, where the US is concerned, the most important event associated with electricity deregulation is probably the California Utilities Commission terminating the deregulation experiment after unambiguously labelling it a failure, and the same thing has happened in Ontario, Canada.