To compete, or to protect a monopoly?

Geoffrey Lawrence

That is the question state governments must ask themselves when it comes to regulated electricity markets. Statists claim that, while markets are the most efficient means of allocating resources for all other sectors, they do not work when it comes to electricity production. Rent-seekers such as General Electric also love the complicated tangle of electricity regulation when it mandates utility companies to purchase products such as industrial wind turbines for which they control the market. (Ever notice who makes those television commercials praising wind power – a 12th Century technology – as the pinnacle of human achievement?)

However, states that have taken the initiative to unleash the power of competition in the electric utility industry have demonstrated that, even in this industry, competitive markets operate much more efficiently than government-protected monopolies. The Texas Public Policy Foundation has just released a new report showing that restructuring electricity markets so that providers are able to compete for retail customers, something Texas began in 2001, has led to a significant lowering of costs to the consumer. Texans can now buy electricity at prices as much as 30.51 percent lower than what they were required to pay the state-protected monopolies as recently as 2001. Nationally, electricity prices have risen 35.3 percent in the same time period, according to data from the U.S. Department of Energy.

Since Texas has ended state protection of electric utility monopolies, consumers are finally able to hold providers directly accountable for any poor investments or production decisions that are necessarily reflected in prices. Now, consumers have the option of going to a more competent provider who is able to control costs.

This lesson should be particularly relevant to Nevadans who were just forced into an electric rate hike and who have no choice in providers. Nevada now has the highest retail electricity prices of all Western states with the exception of California, according to the U.S. Department of Energy. The high cost of electricity in the Silver State raises the cost of doing business and discourages firms from moving into the state.

Perhaps it’s time policymakers consider what has proven so successful in Texas and open Nevada’s electric utility market for wholesale and retail competition.

Geoffrey Lawrence

Geoffrey Lawrence

Director of Research

Geoffrey Lawrence is director of research at Nevada Policy.

Lawrence has broad experience as a financial executive in the public and private sectors and as a think tank analyst. Lawrence has been Chief Financial Officer of several growth-stage and publicly traded manufacturing companies and managed all financial reporting, internal control, and external compliance efforts with regulatory agencies including the U.S. Securities and Exchange Commission.  Lawrence has also served as the senior appointee to the Nevada State Controller’s Office, where he oversaw the state’s external financial reporting, covering nearly $10 billion in annual transactions. During each year of Lawrence’s tenure, the state received the Certificate of Achievement for Excellence in Financial Reporting Award from the Government Finance Officers’ Association.

From 2008 to 2014, Lawrence was director of research and legislative affairs at Nevada Policy and helped the institute develop its platform of ideas to advance and defend a free society.  Lawrence has also written for the Cato Institute and the Heritage Foundation, with particular expertise in state budgets and labor economics.  He was delighted at the opportunity to return to Nevada Policy in 2022 while concurrently serving as research director at the Reason Foundation.

Lawrence holds an M.A. in international economics from American University in Washington, D.C., an M.S. and a B.S. in accounting from Western Governors University, and a B.A. in international relations from the University of North Carolina at Pembroke.  He lives in Las Vegas with his beautiful wife, Jenna, and their two kids, Carson Hayek and Sage Aynne.