Musings on Economic Freedom from the Texas Public Policy Foundation’s
In a few days, Texans will find out if the state agency tasked with streamlining government instead decides to heap more regulations on Texas businesses and higher costs on Texas consumers.
The Sunset Advisory Commission is scheduled to vote next Wednesday on recommendations contained in its Staff Report on the Public Utility Commission of Texas (PUC). Two of the recommendations will harm Texas’ world-class electricity market as well as Texas consumers:
Sunset Recommendation 1.1 Increase PUC’s administrative penalty authority to $100,000 per violation per day for electric industry participants’ violations of ERCOT’s reliability protocols or PUC’s wholesale reliability rules
Sunset Recommendation1.2 In limited circumstances, authorize PUC to issue emergency cease-and-desist orders to electric industry participants
As I explain in the latest Center for Economic Freedom paper released today, Increased Regulation Will Harm Texas’ Electricity Market, these recommendations are big government solutions looking for a problem—a problem that doesn’t exist.
In making the recommendations, the Staff Report claims that the “PUC lacks regulatory tools needed to provide effective oversight” of the Texas electricity market “and prevent harm to the public.”
Given these claims, one might expect to find in the report examples of the PUC exhibiting ineffective oversight. Or perhaps a table filled with listings of market conduct that had harmed the public.
But this isn’t the case; the report fails to offer any evidence of market misconduct at all.
The inability to justify the Staff Report’s recommendations isn’t surprising, though, because the evidence today as Texas struggles with the issue of maintaining an adequate supply of electricity overwhelmingly supports less intervention by government – not more.
More “effective oversight” of Texas’ electricity market – or any market, for that matter – through higher penalties and restricting due process will not help the public. Instead, it will make electricity more expensive, reduce competition, and harm current efforts to increase reliability.
Unfortunately, unwarranted attempts to grow government are nothing new to the sunset review process. In recent years, the sunset process has turned away from the Commission’s task of “identifying and eliminating waste, duplication, and inefficiency in government” despite an increasingly conservative Legislature.
Additional examples of sunset recommendations that would increase government include: increasing the maintenance tax on insurance companies; increasing regulation of private real estate schools; and requiring the registration of all third-party manufactured-housing installation inspectors.
In 2010, the Commission staff recommended that the PUC charge a new fee for its licensing-related activities, then claimed that the fee would result in “[n]o revenue gain to the State” as long as the additional money from the fee was spent by the PUC.
What went wrong with the sunset process?
It starts with the fact that just about every state agency has a date when it automatically ceases to exist unless it is kept alive by the Texas Legislature after a sunset review.
While “sunsetting” state agencies sounds like a great idea and when begun in the 1970s actually yielded some positive results, today no one is going to abolish agencies such as the PUC, the Texas Department of Transportation, or the Texas Railroad Commission. The bills containing sunset recommendations, then, must pass to keep these agencies alive and become vehicles for policies that big government advocates have failed to pass on their own.
We can solve this problem simply by eliminating the “must-pass” nature of sunset bills. Agencies would not be “sunsetted” but would still undergo review, and if the sunset recommendations are worthwhile and can garner broad support, the bill will pass. If not, it won’t.
We’ll wait to see if the Texas Legislature can eliminate the systemic bias toward big government in the sunset process.
But we don’t have to wait to fix the problems in the Staff Report’s recommendations on the PUC. The 12 members of the Sunset Commission can act now to protect taxpayers and consumers from bigger government and higher electricity prices.
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Bill Peacock
Vice President of Research
Director, Center for Economic Freedom
Texas Public Policy Foundation
o: (512) 472-2700
c: (512) 965-6476
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