deregulation of energy1


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DEREGULATION OF ENERGY INSOUTH CAROLINADIRECTED FOR:SOUTH CAROLINA STATE LEGISLATORSCREATED BY:DYLAN L. POTTERRELEASED ON: THE THIRD DAY OF DECEMBER, TWO THOUSAND THIRTEEN Letter Of TransmittalSince the 1970s the deregulation of industries has increased overall economic welfare and sharply reduced prices for consumers- generally by about 30 percent. However, many of the industries in the United States are choked by federal and state regulation, many for unnecessary reasons. This proposal is a call for action to deregulate one of the most powerful industries in the country, the electrical utilities industry, and will provide an in depth explanation of how the deregulation of energy, specifically in the state of South Carolina, will increase the social benefit for consumers and increase economic prosperity among all citizens whom currently pay an electric bill. To deregulate energy is not the complicated task as it may seem. Simply, the biggest action that needs to be taken is in the legislature, from there citizens are inherently granted the choice of who to purchase their energy from. The consumer benefits from deregulation are apparent in numerous sectors including airlines, trucking, railroads, telecommunications, and banking, all of which will be shown in a series of tables, charts, and graphs throughout this proposal. It is not a hail mary to consider the positive consumer benefits attained by the deregulation of the sectors already deregulated will extend to the energy sector, if deregulated. Topics are organized numerically and with roman numerals to assist in flow.

TABLE OF CONTENTSTopic Number and Topic.....Page Number1.) Letter of Transmittal..22.) List of Illustrations........43&4.) Executive Summary........5, 65.) Introduction Pt. I Scope & Purpose........76.) Introduction Pt. II Scope & History...87.) Introduction Pt. III Limitations......98&9) Introduction Pt. IV Assumptions...10, 1110.) Body 1 The Problem1211&12.) Body 2 The Methods..13, 14, 1513.) Body 3, The Conclusion..1614.) Body 4, Conclusion and Recommendations....17 15.) Appendix Glossary..1816.) Appendix References....19, 2017.) Appendix Graphs.2118.) Appendix Charts & Table....22

1. LIST OF ILLUSTRATIONSI. Figure 1- Graph of the United States showing areas of energy regulation and deregulation by stateII. Figure 2- Graph of the United States showing average prices of electric per kWh by state.III. Chart 1 shows the average prices of electricity in Philadelphia from 2009-2013IV. Table 1 shows the effects deregulation had on the major sectors which have already been deregulated.

2. EXECUTIVE SUMMARYI. This report was commissioned to examine the policy history and current state of the regulation of energy primarily focused in the state of South Carolina while using charts, facts, and statistics from similar states to prove that the deregulation of energy in South Carolina is not only beneficial financially to consumers, but will also lead to growth in the state by birthing new companies, and provide an ideal perspective on promoting and practicing capitalism.II. Assumption include a. All consumers want to pay the lowest price for the best possible good/service.b. Perfect competition is required to have a perfect market.c. Capitalism is an economic system consumers support and wish to practice.d. Capitalism flourishes with perfect competition.III. Methods of analysis include the analysis of trends of deregulation proactive states, as well as electrical rates which were lowered across the board after deregulation. Charts and graphs are used to emphasize points. IV. The research draws attention to the fact that deregulation of energy has led to cheaper overall costs to consumers in electricity which is currently charged by kWh. Further investigations reveal that energy proactive states have already made strides in freeing the energy market, including 11 of the 50 states which have deregulated both natural gas and electricity. V. This report acknowledges South Carolinas average rate of kWh is indeed below the national average, and makes apparent that the lowest rate is significantly lower than South Carolinas current rate pointing out that states have seen as much as a 10% drop in electrical costs after deregulation. 3. EXECUTIVE SUMMARY Continued VI. The report determines that all other major sectors, once deregulated, saw a substantial increase in marginal social benefit and is left with the conclusion: South Carolinas deregulation of the energy sector, similarly to other states, would decrease the price consumers pay for energy in South Carolina.VII. To practice capitalism and preserve low electric prices it is recommended:a. That South Carolina citizens launch a campaign to deregulate energyb. That South Carolina legislature makes strong efforts to enforce capitalism. c. That South Carolina legislatures pass legislation to deregulate energy.d. That South Carolina legislature enforce the disbandment of natural monopolies.e. That new energy firms succeed to enter the market.f. That South Carolina energy consumers shop around to find the lowest possible price on their energy prices.VIII. The report also investigates the fact that the analysis has limitations. These limitations include:a. The annual inflation rate is not always adjusted to match the current price of goods/services.b. The current state of the national economy compared to previous figures.c. The current state of each states economy compared to previous figures.d. The anticipated future economic state of the country.e. The anticipated future economic state of South Carolina. These limitations are unknown factors due to the inability to predict certain future outcomes.

4. INTRODUCTION, Part I. Scope and PurposeThe scope of this proposal will explain similarities of energy-regulated South Carolina to two energy-deregulated states: Texas and Pennsylvania. Furthermore, the scope of this call to action is to explain the current energy regulation policy and interpret the possible effects of deregulating energy by applying accepted economic theories to the current economic and political situation of South Carolina. The criteria used in determining what facts to present in this proposal include, the relevance to the topic, historical accuracy, economic jargon relate to natural monopolies, economic policies and theories to correct for natural monopolies and deadweight loss. The report was investigated due to the identification that the problem of regulated energy cripples the South Carolina energy consumer and has a negative effect on the practices of capitalism. The investigation took the compilation of many economic principles, countless policy facts and references (included or excluded in this report), and the careful application of theories to policies. The maps were chosen to demonstrate the growing popularity among the country for energy deregulation, and table 1 shows how deregulation in major sectors has led to substantial consumer benefit increases to reinforce that deregulation is more beneficial if it is widespread and universal among all sectors. A solution is crucial for the practices of capitalism and to sustain a low average of electrical costs in South Carolina. The South Carolina legislature, in context to other state legislatures, has a history of the laissez-faire economic policy, meaning that it is very hands-off and leaves the consumers with many freedoms. After the 2008 presidential election, in an effort to get the nation financially rolling again, newly elected president Barack Obama pushed and succeeded in having the American Recovery and Reinvestment Act of 2009 passed 5. INTRODUCTION, Part II. History and Policyand implemented. South Carolinas governor of the time, Mark Sanford chose to reject a portion of this stimulus money earmarked for South Carolina state congress. Knowing that the acceptance of these funds would only increase the states debt to the nation, Sanford chose to eventually accept the money only on the condition that the state Legislature provided matching funds to help pay off the states debt. When asked about why he eventually accepted the money Sanford commented, Were obviously disappointed by the White Houses decision, because it cuts against the notion of federalism and the idea of each state having the flexibility to act in a manner that best suits its needs. A key element to the punch line lies in what governor Sanford said about each state having the flexibility to act in a manner which best suits its needs. The national government leaves the states with the freedom of decision to regulate or deregulate energy according to how it best suits its needs. Currently in South Carolina the electrical suppliers have what is referred to as a natural monopoly. To protect the financial best interests of citizens, this natural monopoly, is regulated by the state government concerning the prices they can charge consumers. However, a monopoly is a market inefficiency and does not best suit the needs of the South Carolina energy consumers or the state economy as a whole. Deregulation of any sector is in the best interest of South Carolina consumers and this will be proven using historical facts, current statistics among other deregulated states, and charts showing comparisons of regulated and deregulated states. 6. INTRODUCTION, Part III. LimitationsThis report accepts the fact that the analysis conducted has natural limitations which are due mostly to the facts of an unforeseeable certain future. Although Texas current inflation rate is compared to the inflation rate from 10 years ago, the annual inflation rate and every states inflation rate is not always given to the reader to provide an exact measure of the increase or decrease of the United States average kWh or a specific states kWh. The annual inflation rate was not given and would not pr


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