“A fair, open, and competitive marketplace has long been a cornerstone of the American economy…” So goes the opening sentence of President Joe Biden’s executive order promoting economic competitiveness. Calling for a “whole of government” approach, President Biden is signaling a renewed focus on breaking up entrenched monopolies and the rules and structures that support them. I applaud the President’s efforts and am encouraged by his recognition that monopolies and excessive vertical integration aren’t just bad for consumers, but also that these forces stifle innovation and suppress America’s entrepreneurial spirit.

One opportunity for President Biden, and the federal regulators he has tasked with addressing the harms of “economic consolidation,” is a vital sector that literally touches every Americans’ daily lives: the U.S. electrical power grid. Much of the country’s electricity customers fall into two major categories: those within regional or independent competitive markets and those served by traditional vertically integrated utilities. Organized wholesale power markets, such as PJM, which Virginia is a member of, regulate electricity transmission and oversee capacity markets, where energy generators and energy buyers purchase and sell resources. These competitive marketplaces provide substantial benefits for electricity customers by keeping prices low, ensuring reliability, and promoting renewable energy generation and innovation.

On the other hand, traditional vertically integrated utilities operate as monopolies and control the generation, transmission, and distribution of electricity. In these markets, the utilities have total or near total market share and are, therefore, insulated from typical competitive market forces. As a result, these utilities have few incentives to pursue least-cost generation projects or seek operational efficiencies. Further, these monopoly utilities pass all costs on to their captured customer base and earn a guaranteed profit on their capital expenditures. The more expensive the project, the more money they make for shareholders. And, unlike in a competitive marketplace where investors and owners bear all the risk, a vertically integrated structure places all the risk on the customers rather than the utility. This failed model has led to customers paying billions of dollars for projects that never produced a kilowatt of electricity. Just Google “Plant Vogtle” in Georgia or Mississippi Power’s Kemper Project.

There should be no doubt that our nation’s energy future is in renewable and carbon-neutral technologies. In Virginia, we’ve unleashed new, clean energy generation that, thanks to our membership in an organized competitive market, will not only power our Commonwealth but also be purchased by energy companies in other states to meet their clean energy goals and customer demand. Unfortunately, there are certain monopoly utility interests who are spending significant resources to advocate for a different model – one that would solidify their vertically integrated model. Groups like the Dominion Energy-funded ‘Power for Tomorrow’ are sending misleading mailers into legislative districts across the state, including mine, suggesting Virginia could somehow face the same energy crisis Texas did earlier this year. That is irresponsible and plain wrong, but what’s most frustrating is that the people behind these efforts know better.

Thankfully, a growing coalition of voices from business, environmental, and consumer protection groups, are calling for states in regions still dominated by powerful utility monopolies, like the like Southeast and parts of the West, to study whether organized competitive energy markets would advance renewables, reduce overall costs, and ensure greater reliability. In a recent letter to the Federal Energy Regulatory Commission (FERC), a bipartisan group of nine former commissioners advocated for expanding organized power markets, citing higher levels of renewable energy deployment and lower emissions in the footprints of existing markets.

The arc of America’s economic history is filled with moments where government was called upon to reset a playing field that was too long dominated by powerful, centralized interests. By removing barriers to entry, breaking down entrenched monopolies, and encouraging greater entrepreneurial and competitive market forces, these past efforts have brought upon thriving and robust industry sectors now dominated by consumer choice and purchasing power instead of shareholder profits. Expanding organized competitive energy markets across the country would be a great place to apply this method.

Senator John J. Bell (D) represents the 13th District in the Virginia Senate

(1) comment

J Smith

I agree with the author’s basic premise that competitive energy markets are good for consumers, our economy, our environment, and innovation. That’s what competition, a free market, and consumer choice does, it brings out the best in businesses as they seek to offer the best value for the lowest cost.

Too often, however, our state and national energy policies have been based on political interests that drive-up energy costs for Virginia families. Just look at the price of gas lately.

Renewables and carbon-neutral technologies need to compete on a level playing field with coal, oil, and natural gas.

The McAuliffe-Biden-Northam over-regulation of our energy industry, subsidies, and excessive government red-tape is not a level playing field, reduces innovation, reduces competition, reduces choice, and is driving up our energy costs.

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