Did You Know

Noted Economists, Academics Say Electricity Competition the Best Answer for Consumers

A newly released manifesto by leading economists and policy experts says the recent California power crisis shouldn't be used as an excuse to deprive consumers of the full benefits of increasing competition in power markets and throughout the electricity industry.

The 2003 (http://www.haas.berkeley.edu/news/manifesto.html) Manifesto on the California Electricity Crisis is signed by a group of 20 economists and experts, including a Nobel laureate in economics and professors from University of California Berkeley, UCLA and Stanford. It warns that failure to enact meaningful reforms will only compound California's energy woes.

"We have come together because we are concerned with the conflicting policy directions being pursued for the industry at the state and federal levels," said David Teece, Mitsubishi Bank professor of international business and finance at UC Berkeley's Haas School of Business. The manifesto was developed under the auspices of the school's Institute of Management, Innovation and Organization.

The group encourages policymakers to take the following steps to provide reliability and economic stability for electricity customers:

• Vigorously develop competitive markets;


• Assemble a functional set of electricity oversight rules and policies;


• Limit regulation to only those functions the market cannot perform efficiently;


• Allow competitive producers to provide electricity generation;


• Clarify the jurisdiction of federal and state agencies to avoid further restructuring delays;


• Rebuild the commodity market and allow consumers to enter into long-term contracts; and,


• Implement real-time pricing of electricity.

"We encourage the state to realize that the energy crisis was the consequence of a flawed regulatory design and of misguided decision-making at the time of the crisis, rather than the result of any inherent inability of electricity markets to work," the authors said.

The signatories of the 2003 manifesto include Nobel Laureate in Economics Vernon Smith from George Mason University, Professor James Sweeney from Stanford University, professors Harold Demsetz, John Riley and Richard Rumelt from UCLA, Professor Pablo Spiller from UC Berkeley, and Mitch Wilk, former president of the California Public Utilities Commission.

For more information, including the full document, visit http://www.haas.berkeley.edu/news/manifesto.html or contact EPSA's Douglas Austin at daustin@epsa.org, or call (202) 628-8200.