Sunday, August 17, 2003

The blackout has past, but the commentary on continues to flow. One of the main bits of comments floating around is this idea that the blackout was the result of deregulation. This really bugs me. There was no deregulation in the '65 or '77 blackout. It's not as if a fully regulated system is able to prevent such a massive blackout, so its really disingenous to claim that this blackout was a result of deregulation.

I think, one might make the argument that this shows that deregulation and privatization of the electric system is even more needed.

Let's remember that while there has been some deregulation, it is hardly a free-market system. The federal and state government still controls many if not most of the aspects of the generation and distribution of electricity.

The infrastructure of the power system has not been upgraded primarily because of the high cost and lack of investment in this part of the system. Why is it like that? Because this part of the system is, if I understand it correctly, still heavily regulated and the profit margin in this area is very small and so investers aren't willing to put their money there.

There is also a tragedy of the commons here with everyone wanting the upgrades, but no one thinks they should foot the full bill for it and everyone using the system and trying to get as much out of as possible.

In a free system, I think, black outs would less common because of more competition and more investment in infrastructure.

Check out this link for more information on the black out:
Reason Public Policy Institute: Blackout Resource Center

More information on privatization of the electric system:
Electricity Competition Center

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