The California electric power system unfairly subsidizes costly peak power use from off-peak users, says Nobel prize-winning economist Vernon L. Smith.
If energy companies were allowed to vary the price of retail power according to actual costs, consumers would be able to pocket the difference in production costs by shifting energy usage away from peaks and toward troughs.
Furthermore, separating the market for energy and the market for delivery (by the monopoly local utility) would create a competitive environment that benefits customers while opening opportunities for new market entrants and the development of new technologies.
Source: Vernon L. Smith (George Mason University) and Lynne Kiesling (International Foundation for Research in Experimental Economics), “Socket to California,” Wall Street Journal, November 10, 2003.
