Look Outside Politics for Blackout Solution

Last week’s blackout that paralyzed much of the northeast has politicians scrambling to assign blame and pledge action to fix the problem.  The universal consensus is that government, specifically Congress, must immediately “do something.”  As with most crises, the problem is instantly assumed to stem from a lack of government regulation. 

Yet few industries are more regulated than the electricity industry.  Power companies have become quasi-public entities; many are municipally owned.  The Federal Energy Regulatory Commission, the Environmental Protection Agency, and a slew of state and local agencies regulate every action they take.  When a problem happens, however, nobody cries out for greater freedom in the electricity industry or condemns government for too much regulation.

It’s true that the nation’s power grids are inadequate for today’s needs, and that a relatively small overload in a vulnerable spot can create a huge problem.  This is hardly an indictment of the free market, however, but rather an indictment of the stifling maze of government regulations that burden electricity producers.  Energy bureaucrats, despite their attempts at centralized planning through production and price controls, can never hope to determine how much electricity should be produced, where it should be channeled, and at what prices it should be sold.  The very complexity of the power grid, which resembles a spider web dotted by population centers, cries out for the economic cooperation that only the invisible hand of an unregulated market system can provide.   

As economist Thomas DiLorenzo points out, the fundamental problem is government interference with supply in the electricity market.  The nation’s population has risen dramatically in the last 30 years, causing a huge increase in demand for electricity.  But supply has increased little if at all, thanks to environmentalists and land-use bureaucrats at both the state and federal levels.  The Neo-Luddites, as DiLorenzo terms them, are adamantly against building new nuclear power plants, hydroelectric dams, and especially coal or natural gas-fired electric power plants.  When demand grows without a corresponding increase in capacity, the entire electric grid becomes overloaded.  Last week demonstrates that it doesn’t take much to tip the balance and crash the system over a large area.

Electricity, from coal burning sources or not, is likely to remain our primary form of power for decades.  We simply need to accept this and build more electric power plants.  In a free market, profit-seeking companies would be happy to build new plants and sell power to an ever-growing population.  Unless and until government stops restricting supply and controlling prices, however, we can only expect the electric power system to remain vulnerable.  It is precisely because electricity is so vitally important in our modern world that it should be delivered by the efficient free market, rather than the dismal bureaucratic sector.  In this day and age, it is preposterous that we have problems delivering simple electric power where and when it is needed.  The recent blackout cannot be blamed on technology or a lack of capital, and certainly not on a supposed market failure.  The real problem- too much government regulation- is likely to be ignored as Congress rushes to engineer a wholesale federal takeover of the electricity industry.