Errm, Dean, Well…

I see your point but….

The regulatory policy that states had in place was deliberately to designed to have a cross subsidy, with industrial users paying more so that residential and commercial users could pay less. One expected result of deregulation would be that this cross-subsidy would be eliminating, which would mean that electricity prices for residential and commercial users would rise relative to prices for industrial users. It would be quite striking, if it turns out that even industrial users did not benefit from deregulation.

I\’m perfectly willing to agree that such a cross subsidy was in fact what was planned, what was desired. However, I would argue that there is at least the possibility of an alternative explanation of the results of deregulation. That such a cross subsidy was not in fact achieved. That, despite the desires of the planners, it was actually industrial large users who were subsidised by residential and commercial users.

That does at least explain the observed facts, that industrial users are facing higher (I assume relative to commercial and residential…for if everyone is paying higher prices then that might just be changes in raw materials or fuel costs) prices under the deregulated system.

It also fits with my own prejudices Bayesian Priors, that when a system of such cross subsidy, of regulation, is set up, whatever the intended outcome, those with the biggest incentives are going to be those who strive most to make sure that the system benefits them. Thus the industrial users, given that they had vastly higher and more concentrated benefits from gaming the system than residential users did, worked harder to make sure that they system benefitted them, not the residential users.

In short, such planned systems might have an intended outcome, and we often see when they unravel that the actual outcome was the opposite of what was planned.

A good reason not to have such planned systems, of course.


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