It's widely agreed that a truly competitive market can spark innovation and price competition, both of which should end up benefitting society at large. But there are some places where markets are an awkward fit, and electricity production is one of them. In the developed world, we effectively view having electricity as a human right, something required to fully participate in society. And the production of electricity comes with some rather large externalities, costs that are borne by society as a whole, like the health impacts of burning coal.
Nevertheless, in the US, we've generally tried to open up utilities to competition, under the view that it should help lower prices for consumers. While deregulation may have had that effect, it also seems to have generated infuriating behavior, the pinnacle of which was Enron's illegal manipulation of California's market, which led to widespread energy shortages.
I'm reminded of this because I recently came across an article that's almost equally infuriating, although in a different way. It concerns FirstEnergy Corp., an Ohio-based utility. Back in 2008, FirstEnergy was a big proponent of deregulation. During the same time, it bet big on coal and nuclear, figuring that two sources of electricity with relatively stable prices would stand it in good stead.
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