Tommy Denton

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Ever since Ray Marshall presented a clear, comprehensive economic analysis effectively rebutting the argument for a proposal to deregulate electricity in Texas some 15 years ago, I have doubted both the practicality and wisdom of such a misguided endeavor.

Marshall, labor secretary under President Jimmy Carter and now professor emeritus of the Audre and Bernard Rapoport Centennial Chair in Economics and Public Affairs at the University of Texas, had dropped in for a chat with the editorial board at the newspaper in Fort Worth where I worked in those days.

I have been amazed at the precision with which Marshall's compelling tutorial anticipated the ensuing debacle. Under the free market, a once-tightly regulated industry fell into the exploitative grip of corporate arbitragers who sought to treat the generation and distribution of electrons as any other commodity.

Promised competition never materialized, costs soared rather than fell, and chaos -- and eventually felony convictions -- became the order of the day.

Although Virginia lawmakers, in their faith-based zeal, stampeded to deregulate electricity several years ago, the ugly evidence of broken promises could no longer be ignored. After granting Virginians a reprieve from the effective date of deregulation from 2004 to 2011, the General Assembly now should abandon the mistake.

Nationwide, the dukes of deregulation invested heavily in legions of lobbyists through the late 1980s and 1990s to persuade Congress and state legislatures to abandon regulated utility monopolies and impede the divine right of markets no longer.

Among the more ambitious entrepreneurs seeking such favors, enthusiasm for the theoretically possible and their capacity for greed quickly outpaced the human ability to anticipate unintended consequences.

Also at work were those voracious visionaries who foresaw the need to drop archaic barriers, such as strict accounting rules, which had a maddening propensity to frustrate obscene profit-making.

Not by coincidence were the energy and accounting industries in the mid-1980s lobbying Congress to relax accounting and regulatory standards in preparation for paving their expected road to riches.

It worked for a while. The paladins of plunder, their stock options multiplying at warp speed, performed incredible feats, almost metaphysical feats.

Then, the unravelling began. First came the price-gouging nastiness of shortages in California in 2000-01 -- some orchestrated, some the consequence of incompetence.

Soon thereafter came the related grotesqueries of what any dispassionate observer could interpret as ethical rot in American corporate board rooms, as epitomized by Enron, Dynegy, El Paso and Williams, among the relevant energy-trading companies called to answer for suspicious activity in the accounting scandals.

Now, according to a recent report in The New York Times, comes new evidence of how the paragons of market expedience used new deregulation-related "opportunities" to make a killing -- at the expense of the general public.

Four large investment firms in 2004 bought several Texas power plants for about $900 million and sold them the next year for $5.8 billion.

As reported by David Cay Johnston in The Times, those profits paid a splendid return on the investment for the firms, but it did not translate into deregulation's promised lower electricity rates for customers. On the contrary, consumers not only see their bills shoved higher by the pass-throughs for higher fuel costs but also many must pay surcharges to cover the increased cost of the power plants.

Such shenanigans were not allowed when a state regulated a monopoly utility, demanding reliable, abundant, affordable energy in return for a fixed profit margin.

The consumers now are whiplashed by the vagaries of a deregulated system that invites the entrepreneurial pursuit of an entire range of financial activities that may, or may not, have anything to do with the efficient, abundant, affordable generation and distribution of electric power.

Even so, some states like Texas, Missouri and Arizona are consoling companies who ventured into the marketplace and failed. Having stumbled in the unregulated free-for-all, some companies have petitioned for regulatory safe haven, where their plants now almost certainly will turn a profit.

Of course, they'll have to produce to keep the protection. But the nation had that system for more than 70 years and became the most prosperous society in the history of the world.

Slow relearning is better than no learning.

Denton's column appears in the Sunday and Tuesday editions of The Roanoke Times.