Electric Competition: The Antidote for Bad Behavior

Policymakers should not dismiss these developments as merely the work of a few bad actors, but as the latest evidence of a behavioral pattern tied to flawed institutions. Public policy works best when aligning financial incentives with productive company behavior. Electric competition accomplishes this and serves as a partial anecdote for bad behavior. It also provides an essential pathway to restore public trust and accelerate an economical energy transition that drives innovation and emissions reductions.

The perverse incentive structure of monopoly utility regulation encourages bad behavior. States like Ohio and Illinois shifted toward a competitive market model but did so incompletely. This left a monopoly entangled with competitive markets and enabled conduits for bad utility behavior. A proper competitive structure, such as Texas, reduces the opportunity and strength of financial incentives for bad behavior.

State policymakers should require thorough electric generation divestiture and remove the monopoly distribution utility from providing default retail service. States should enable competition wherever possible and improve the transparency of distribution system planning and operations. State policymakers should aim to build cultures appreciative of electricity commodity markets and build resistance to subsidy-seeking entities.