Will the Invisible Hand be Cuffed by Re-regulation?

by Brandon Ellett | The Commission Exchange

Rewind 240 years.

Economist and philosopher Adam Smith’s 1776 metaphor of the invisible hand illustrated how free market dynamics and competition leads to the most efficient use of resources and creates wealth for the economic system.

Fast forward to present day.

The power to choose providers in deregulated electricity markets is an iconic example of the 21st century’s invisible hand. Will the invisible hand continue to move markets in a positive direction, or will naysayers of deregulation handcuff and halt it?

In Ohio, where deregulation is in full swing, consumers have saved $15 billion over the past five years, according to a study released in November and sponsored by the Northeast Ohio Public Energy Council (NOPEC). Another study, prepared by teachers and scholars at Cleveland State University and Ohio State University, projects an additional $15 billion in consumer savings over the next five years under continued deregulation.

As the state’s largest energy aggregator and consortium, NOPEC strongly – and understandably – advocates for continued deregulation. On the other side of the fence is, among others, Ohio Edison’s parent company, FirstEnergy Corp, which strongly favors re-regulation. Many are left scratching their heads at any potential quest to re-regulate because, as the universities’ study articulates, it “would cost Ohio’s ratepayers significantly.”

Let’s step back from energy markets and look at competition itself, using track and field Olympians as an example. Competition is fierce, and no stone goes unturned in training for events and analyzing minute details to ensure triumphant outcomes. In the absence of competition, a pole vaulter would take home the gold regardless of the height jumped, and a marathon runner would have no incentive to push harder in the face of an absolute victory. The same can be said for competition in the electricity markets. Deregulation allows for competition, and competition ensures that a single provider doesn’t “win” just because no one else is allowed to raise the bar or run the race. Without competition, utilities become monopolies.

By definition, a monopoly is the exclusive possession or control of the supply or trade in a commodity of service. Let that sink in for a minute. Is exclusive possession or control of electricity good for consumers? It most certainly is not, and the states where deregulation has been in place for many years, including Texas and Pennsylvania, have benefited tremendously from not having an electric utility monopolize the market. Those widespread benefits include lower and fiercely competitive rates, better customer service, improved technologies, additional energy options, including greener energies, and economic growth.

In Ohio, Alliance for Energy Choice spokesman Todd Snitchler is frequently quoted on the side of deregulation, noting that competition has worked, ratepayers are saving money and the outcome has been positive for Ohio.

In late-February, several dozen energy industry professionals gathered in Columbus for #EPOStatehouseDay to voice concerns about re-regulation in Ohio. It struck me how very few of us were there to talk to policymakers, push for continued deregulation and combat powerful pro-regulation lobbyists. While that’s the bad news, there’s also good news: It’s not too late to contact elected officials and urge them to push for continued deregulated and competition in energy markets.

But the clock is ticking. It’s time to make your opinion known. And if you think a single voice won’t make a difference, deploy the words of William Shakespeare: “I’ll speak in a monstrous little voice.”

Tick tock. Tick tock. Now is the time to speak up and have your monstrous voice heard.

About the Author

After working in a business development capacity for one of the fastest-growing REPs in the United States, entrepreneur Brandon Ellett founded The Commission Exchange (thecommissionexchange.com) in 2015 to address the cash flow gap between commissioned contracts and residual payment structures. The Commission Exchange has become a go-to resource for REPs and commissioned sales professionals for viable, innovative options for immediate, adjusted payment commissions. Ellett is fighting aggressively for continued deregulation and competition.