If Offered Free-Markets or “Regulatory Certainty,” Choose Free-Markets

If Offered Free-Markets or “Regulatory Certainty,” Choose Free-Markets

Tom Giovanetti | Institute for Policy Innovation

April 18, 2019

I thought I was already cynical enough. I guess I was wrong.

Over the years I’ve seen elected Republican politicians telling voters about how strongly they stood for “free-market principles” and then vote in ways that are completely contrary to those principles. I’ve seen it so many times that I didn’t think I could be surprised.

But I was wrong.

There is a bill before the Texas Legislature that explicitly makes new competition illegal in an industry. It locks in the existing companies doing business in Texas, and makes it illegal for a new company to enter that marketplace. Can you imagine?

Conservatives say they hate crony capitalism, but a bill that makes it ILLEGAL for a new competitor providing a legal product or service to enter a market takes crony capitalism to a whole new level.

And the bill just passed out of Lieutenant Governor’s Dan Patrick’s Senate 30-1. Every single supposedly free-market Republican senator voted in favor of it, except for Senator Bob Hall. Now it’s headed to the Texas House.

The House bill is HB 3995, by Rep. Matthew Phelan, and the Senate bill is SB 1938, by Sen. Kelly Hancock. These bills lock in all future electric transmission projects [what’s that] to a cartel of the existing players. Here’s the language direct from the bill:

“ . . . a certificate for a new transmission facility that directly interconnects with an existing electric utility [they all do] may only be granted to the owner of the existing facility.”

That’s a heckuva nice benefit for the existing companies, and it’s about as anti-competitive as you can get.

A basic principle of free markets is low barriers to entry for new businesses. That’s because competition is good for consumers and for the economy. Competition drives innovation, customer service and low prices. So in a free market economy we want to make it easier, not harder, for new businesses to enter markets and compete.

This bill makes it IMPOSSIBLE.

You can’t justify this legislation from a free market perspective, but that hasn’t stopped some from trying. In an April 17 piece in the Dallas Morning News, Bernard Weinstein (who we very often agree with on energy policy), in a single paragraph, claims that we don’t really want competition in Texas and that competition is bad. Weinstein says, “the adoption of competitive transmission would open up a Pandora’s box.” So Weinstein believes in state managed electric transmission rather than a free market, competitive process. He likes it because it creates “regulatory certainty.”

Well, regulation ALWAYS creates certainty. That’s not a justification for it. One of the certainties this regulation creates is the certainty that established players won’t have their businesses disrupted by competition. That’s an argument for a government-managed economy rather than a free market economy, and I thought Texas preferred free markets.

Competition drives prices lower. If the Texas House and Governor Abbott approve of this crony capitalist windfall, Texans will inevitably pay higher prices for electricity than otherwise. In a free market economy, we always choose competition over “regulatory certainty.”