February 21, 2018 Read More →

Op-Ed: Let Markets Decide Winners and Losers

The Hill:

If power plants are profitable, subsidies only serve to pad a company’s bottom line. If they’re not profitable, taxpayers should not prop them up. Rather than keeping them on life support, government should allow economic failures to fail so that those resources are free to flow to more useful purposes elsewhere in the economy.

Ironically, the Energy Department’s initial anti-competitive proposal prompted mass organization of pro-competition interests that are ready to go on the offensive. Broad coalitions — such as the Affordable Energy Coalition — have formed in defense of markets. And therein lies the opportunity for the Energy Department to shift course and embrace competitive forces.

Economic fundamentals, not cronyism, should drive electricity investment decisions. Competitive electricity markets align economic incentives and put customers, not well-connected companies, first. Putting private capital at risk, rather than socializing risk through taxpayer or ratepayer-funded subsidies and regulated monopolies, ensures that companies properly assess their investments. This is why competitive markets have outperformed monopoly investments, resulting in cost-efficient investments, increased innovation and more choice for American families and businesses.

Competitive merchants have retired the type of expensive plants that monopolies have retained to boost their regulated returns. And while these merchants are investing in new, innovative and inexpensive plants, monopolies are pursuing expensive boondoggles like those plaguing customers in South Carolina, Mississippi and Georgia.

In an April 2017 memo, Secretary Perry requested a study examining the country’s electricity markets and reliability. The Energy Department should seek to enhance competitive markets by following through on technical recommendations from the resulting staff report. Furthermore, the department should offer its modeling and other in-house technical capabilities to grid operators and FERC officials as they continue to examine grid resilience. This would complement a broader conservative energy reset, anchored by a commitment to competition, customer choice and good governance.

But if Round II resembles Round I, the administration will dig itself into a deeper hole. For decades, the federal government has implemented distortionary energy subsidies and regulations. Further undermining competitive markets and pouring billions in subsidies to cronies is a surefire way to harm all energy customers, stifle innovation and promote energy dependence on handouts. Congress should press the administration for a course correction — or else members will face the wrath of dismayed voters with higher energy bills this fall.

More: Energy policy should be guided by the free market — not by subsidizing losers

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