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Energy Disrupted: Why States Fail to Deregulate

At Columbia, we are big proponents of deregulated energy markets. That’s because our corporate values closely resemble those of deregulation: consumer fairness, market diversification, financial transparency, and freedom of choice—or what we call “energy choice.” In a sense, it is what our founding fathers also stood for when they opted for a state model. Their motivation in protecting states’ rights was ultimately to protect individual liberty.

To explain what state rights have to do with individual rights, take the energy market as an example: if the federal government controlled every aspect of the nation’s energy market—across all 50 U.S. states—then no state would be able to establish a deregulated energy market or offer energy choice to household consumers and corporate prosumers.

We are grateful that many states have deregulated at least one aspect of their power or natural gas market for at least a portion of their residential or business customers. Still, we are left to wonder when the other states are going to follow suit. What is stopping them from shifting away from the heavily regulated, rate-controlled, single utility model?

In 2020 alone, we have already seen three states fail in their push for choice.

Florida: Money vs Choice

Proponents of energy choice in the great state of Florida were sorely disappointed earlier this year when their energy deregulation amendment was scrapped from the 2020 ballot following a unanimous decision by the Florida Supreme Court that the ballot summary was misleading. The court conceded that the energy deregulation amendment would grant “several rights, such as the right to purchase electricity from a provider of one’s choice, the right to purchase electricity in competitive wholesale and retail markets, the right to generate electricity oneself or in combination with others[1],” but that it would not offer a “freestanding constitutional right to sell electricity” as alluded in the ballot summary. For this reason, the Florida Supreme removed the energy deregulation amendment from the 2020 ballot.

The action by the Florida Supreme Court does not paint the entire picture of the opposition, which seems to primarily be financially driven. After all, Florida consumers already pay average[2] costs for energy compared to the rest of the country. But proponents of the amendment asserted their stance was not about prices, rather freedom of choice. In a competitive market, prices should remain exactly that: competitive.

Virginia: Demand Not Enough to Topple Powers That Be…Yet

In February 2020, two measures to expand Virginia’s renewable energy market passed by the House, but were ultimately thwarted from reaching the Senate floor. There is still hope for the state; however, Virginia briefly flirted with deregulation more than a decade ago before deciding to re-regulate in 2007. Retail competition legislative bills have plenty of support in Virginia to this day as the demand is high among business and environmental organizations.

Missouri: Cheap but Not for Long

In January of this year, the Missouri Senate Committee on Transportation, Infrastructure, and Public Safety, stopped legislation from going to vote that would have established an open and competitive retail electric market. The Senators rejected the legislation citing concerns that an open retail market would have had “dire consequences for ratepayers and the state economy” due to the supposedly inherent greedy nature of private, non-local utility owners. As with Florida, residential customer rates were already very low, and so opponents of the legislation assumed deregulation would cause costs to go up. This ignores the fact that Missouri’s rates have increased by 40% over the last 10 years, which is six times as much as deregulated states in the same span[3]. State senator Doug Libla says he introduced the legislation exactly because of this spike in energy bills.

Says the senator: “Currently, in a monopoly environment, consumers have no choice where they can buy their electricity. But monopolies are like buggy whips, they’re just kind of like…out of style. So, you have a lack of innovation. Consumer choice is the big word[4].”

What to do?

Remember the founders’ logic when they were piecing together our great country, state by state: If you don’t like the way your state does things…move somewhere else. Luckily for proponents of energy choice, you have 29 states to choose from.

But since moving is not always a realistic option, consider instead writing letters to your state senators and assemblymen and women. Also, please keep the conversation going with neighbors, friends, and colleagues.

 

[1] Gancarski, A. (2020, January 9). Supreme Court tosses energy deregulation amendment off 2020 ballot. Retrieved April 20, 2020, from https://floridapolitics.com/archives/315338-supremes-spike-energy-choice

[2] US Energy Information Administration. (2020). State Electricity Profiles. Retrieved from https://www.eia.gov/electricity/state/

[3] Brandt, J. (2020a, January 30). Electric deregulation bill fails in Missouri committee. Retrieved April 20, 2020, from https://dailyenergyinsider.com/policy/24066-electric-deregulation-bill-fails-in-missouri-committee/

[4] Ibid.