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Texas Froze by Design

In 2002, under Governor Rick Perry, Texas deregulated its electricity system and established a free market, managed by a non-profit entity, with roughly 70 providers. But while the new system worked most of the time, people need electricity all the time.

AUSTIN – Harvard Kennedy School’s William Hogan is credited with designing the Texas energy market. As Texans froze and their water pipes burst, he reportedly remarked that the state’s energy market has functioned as designed.

Hogan is right, which says a lot about how some economists think.

For years, electric utilities were a stable, dull business. To counter the effects of monopoly, utility commissions set and stabilized prices, and companies got a rate of return on their investment that was (in principle) enough to cover construction, maintenance, and a fair profit.