Robert Samuelson leaves me banging my head

Robert Samuelson is normally a careful analytical columnist. But today's column in the Washington Post is ridiculous. It's about deregulation of electric utilities, and he's basically for it despite the anticompetitive, manipulative actions of energy companies.

Whatever the sins of Enron and others in California, politicians and regulators committed the greatest blunders. Here's a short list: (a) Approval was slow for new plants, creating an electricity shortage; (b) as wholesale electricity rates rose, state regulators insulated consumers from the increases (this worsened the shortage, because low rates stimulated demand); and (c) the state's major utilities, forced to buy electricity from independent power producers, couldn't sign long-term contracts and had to pay rising daily prices. Absent all the errors, the crisis wouldn't have occurred.

Approval was no slower for California than it was for any other densly populated area. And as for the "regulation" that remained that he mentions in (b) and (c), these were laws that the energy companies wrote! These were pushed through by a bipartisan majority bought and paid for by the big energy companies. And when they got them passed, then companies like Enron used market manipulations like "Death Star" and "Get Shorty" to hold California to the wall and rape her. These congested the long-distance grid with phony transactions so that California couldn't get enough electricity when it needed it. There wasn't a technical problem. If you don't believe this, look at the Federal Energy Regulatory Commission (a group with strong deregulation bias) reports on the California crisis. And if you don't believe them, just quit reading now.

Saying that barring Enron, the crisis wouldn't have occured, and it's the fault of the regulators is like saying barring icebergs, the Titanic wouldn't have sunk, and it was the fault of the shipbuilders.

After the blackout, the search for a scapegoat could easily go awry. Electricity won't ever be deregulated. The real issue isn't between "the market" and "regulation," because the danger of bad regulation is at least as great as that of bad market behavior. What we ought to seek is an intelligent balance of government regulation and market flexibility.

Absolutely. That's why you could buy stock in power companies before deregulation. It wouldn't light a fire under the market, but it would be a steady performer. And that's what we need to go back to, because we've found that the alternative we made just doesn't work.