Clicking on banner ads enables JWR to constantly improve
Jewish World Review Dec. 27, 2000 / 1 Teves, 5761

Jack Kemp

Jack Kemp
JWR's Pundits
World Editorial
Cartoon Showcase

Mallard Fillmore

Michael Barone
Mona Charen
Linda Chavez
Greg Crosby
Larry Elder
Don Feder
Suzanne Fields
James Glassman
Paul Greenberg
Bob Greene
Betsy Hart
Nat Hentoff
David Horowitz
Marianne Jennings
Michael Kelly
Mort Kondracke
Ch. Krauthammer
Lawrence Kudlow
Dr. Laura
John Leo
David Limbaugh
Michelle Malkin
Jackie Mason
Chris Matthews
Michael Medved
Kathleen Parker
Wes Pruden
Sam Schulman
Roger Simon
Tony Snow
Thomas Sowell
Cal Thomas
Jonathan S. Tobin
Ben Wattenberg
George Will
Bruce Williams
Walter Williams
Mort Zuckerman

Consumer Reports

The Grinch who turned off the holiday lights --
A GRINCH who wanted to create an energy crisis would prevent new energy supplies from being tapped or created and limit return on investment in energy production to reduce or eliminate economic incentives.

He'd micromanage energy supply and demand by promoting grossly inefficient "boutique" energy sources like solar and wind power while imposing myriad environmental regulations that require "boutique" energy products. Meanwhile, he would demand energy austerity by the public under the rubric of "energy conservation."

California has done all of the above, and the result is predictably disastrous: threats of rolling brownouts, darkened Christmas lights, record-high wholesale prices (over $1,000 per kilowatt hour!) and even calls for the state to take over the energy industry. California's government is at war with the Federal Energy Regulatory Commission over its refusal to cap power rates. Instead, FERC is trying to make it easier for California utilities to contract with other power suppliers. California's officials should have learned from last summer's heat wave, when surging power demand led Cal-ISO, which manages the state's power grid, to cap wholesale power prices at $250 a kilowatt hour. That encouraged power companies to sell power anywhere but in California at a time when in-state supply was already unable to cope with demand. There's a lesson here that politicians never seem to learn: Price controls don't work.

The press spins the situation in California as a dramatic failure of deregulation, since the Golden State passed a partial deregulation plan for the power industry in 1996. But "partial" is the key word here, since the state thwarted creation of new power sources and did nothing to encourage new suppliers of energy. California wrongly assumed stable demand just when Silicon Valley and Southern California were about to explode with New Economy industries no one had dreamed of before. Thanks to a combination of radical environmental ideology and "not-in-my-backyard" opposition to new power plants, California hasn't built a new power plant in 15 years. Ironically, California has just restarted a mothballed nuclear power plant in San Luis Obispo despite the state's antipathy to nuclear energy, the only viable nonrenewable energy source.

Letting prices and markets adjust, combined with short-term conservation measures, should enable Californians to weather the current crisis. In the long run, though, the only meaningful conservation comes in response to price indicators - when energy starts to cost too much, we try to find ways to use less of it, and to use what we must use more efficiently. President-elect George W. Bush has an energy plan based on exactly those principles, and he's already expressed concern that without a supply-side energy policy, California's crisis could be the first of many.

California's problems are aggravated by its mania for becoming an ecological utopia, which affects not just power plant construction but the cost of generating power under the state's aggressive emissions limits. Limited power has been available from the Pacific Northwest, which had a cold snap of its own and whose hydropower capacity has been limited by dry weather. The whole idea of having reserve capacity is to be able to meet crisis-driven peak demand without overwhelming the power grid. California hasn't done that, and the government will only worsen the situation if it yields to pressure to ban out-of-state sales by California power companies. That kind of energy protectionism will only backfire.

California is an extreme example, but the United States as whole lacks a coherent market-based energy policy. We suppress nuclear power despite its ecological benefits (no emissions and an excellent safety record), we limit use of our abundant coal reserves out of concern for air quality, and we tightly regulate prices and supply in every state of the union so politicians can appear to be consumer-friendly. But a spasm of energy austerity is no way to help the consumer.

Not only do we subordinate the goal of steady, reliable energy supplies to an extremist ecological and political agenda, we've completely failed to grasp that the New Economy is driving much of the growth in energy demand and is a sector that needs near-100 percent reliability from the power grid. Mark Mills and Peter Huber of George Gilder's Digital Power Report make a compelling case that the Internet and the infrastructure supporting it are the fastest-growing sources of energy demand. Even the U.S. Department of Commerce says information technology industries contributed a third of U.S. economic growth between 1995 and 1999. As Thomas Mulligan wrote in the Los Angeles Times, where high tech is concerned, "Certain cutting-edge operations require what engineers call 'six nines,' or 99.9999 percent reliability."

California, center of the high-tech world, has to do better, but so does the rest of the country. That means more diversified sources of energy, market pricing, ending regulatory barriers to new plant construction and balancing ecological concerns with the demands of everyday life in this brand-new technological century. The fastest-growing, most advanced economies always do the best job of protecting the environment. Growth truly is green, and it's too bad California has to learn that lesson the hard way.

Jack Kemp is co-director of Empower America and Distinguished Fellow of the Competitive Enterprise Institute. Comment by clicking here.


12/20/00: Forging ahead
12/13/00: A new tax system for the 21st Century
12/07/00: Global government in retreat
11/30/00: An open letter to Fed Chairman Alan Greenspan
11/21/00: Don't forget the guy in charge
11/15/00: Civic virtue, civic vice
11/08/00: Memo to the president-elect
10/31/00: Scare tactics won't work
10/24/00: Prosperity in the balance
10/11/00: Al Gore's economics of fear
10/03/00: Al Gore IS debatable
09/27/00: Government should protect our online privacy
09/13/00: The most important issue
09/05/00: Defeating the Gore blitz
08/29/00: Workers of the world, rejoice
08/22/00: Just the facts, Mr. President
08/08/00: Reclaiming Lincoln's legacy
06/23/00: A renaissance for urban America?
06/16/00: Capital access can bridge 'digital divide'
06/08/00: Some friendly advice for Rick Lazio
05/26/00: Is the economy being saved or destroyed?
05/22/00: Immigration and the promise that is America
05/12/00: Stock market roulette or snobbery?
05/04/00: Is Rule of Law whatever we say it is?
05/01/00: Myths happen

© 2000, Copley News Service