Sandeep Vaheesan –
Since the 1970s, Congress and federal agencies have replaced regulator-established rates with market-derived pricing in many sectors of the U.S. economy. Electricity and natural gas are two such industries. Congress and the Federal Energy Regulatory Commission (FERC) have abolished regulated rates and instituted market-based pricing in a part of the electricity and gas supply chains. (At a simplified level, both industries have three segments: production, transmission, and distribution. Policymakers generally still treat the transmission and distribution functions as monopolistic.)
These legislative and regulatory decisions are premised on the belief that markets are superior to direct public control of rates and other terms of service. While this process is often described as “deregulation,” the term is a misnomer. This industrial restructuring is a transfer of discretionary authority from public bodies to private actors. Instead of structuring competitive markets in this new environment, the federal courts have defended private market power and helped scale back all public control of sellers and traders of electricity and gas. A case before the First Circuit (in which my Open Markets Institute colleagues and I filed an amicus brief in support of the plaintiffs) illustrates this theme.
In Breiding v. Eversource Energy, New England residents have accused two large utilities of violating antitrust and consumer protection laws by creating an artificial shortage of gas and engineering a chain of events that dramatically drove up the cost of electricity. The district court dismissed the plaintiffs’ complaint and expanded a judicial doctrine intended to protect the integrity of regulator-set rates to also insulate market-based prices from private lawsuits. This decision, which is consistent with rulings by other courts, grants gas producers, power generators, and traders the freedom to engage in exclusionary and other unfair practices. In electricity and gas, the net effect of legislative, regulatory, and judicial choices over the past 40 years has been a dramatic erosion of public control over public utilities.