The recent blackout that the Northeast and Canada experienced came as the inevitable consequence of years of government regulation of the electric power industry. What led to the massive shutdown on that sweltering August afternoon was the result of state manipulation and control of the power supply.

The power industry, like many other industries in the public-private utility sector, is organized around government licensing for entry into the market.

When the state is given control as such, the result is a “municipal monopoly.” In such a situation, the producer granted the monopoly has no incentive to deliver the highest quality service to the consumer at a competitive price and the consumer has no choice but to purchase services from that producer.

Should consumer demand for the service increase, as the demand for electricity typically does in the heat of the summer months, and prices are not allowed to adjust to best satisfy such changes in demand, as is the result of government-mandated price controls, there arises a shortage and the channels of supply are strained beyond capacity.

Given that the producer need not strive for lower costs and prices in a competitive market, for none exists when the state intervenes in such a way, there is no motive for producers to innovate methods so as to more efficiently utilize resources.

This is why a majority of current power delivery systems are based on technology from the 1950s.

Such outcomes are unavoidable when the government seizes control of the market in attempts to specify what people want. The future of the electric utilities industry will continue to be plagued by blackouts caused by inefficiency and overuse if the market is not allowed to function.

Erich Mattei

Economics/Business, Senior