[Joseph_E._Stiglitz,_Carl_E._Walsh]_Economics(Bookos.org) (1)

travelers from these communities often must pay extremely high fares. A pattern of
discriminatory pricing has developed, and businesspeople who cannot make reservations
weeks in advance are charged four or more times the fare of a vacationer
for the same seat.
Deregulation has not yet extended to natural monopolies like water. But the
deregulation of electricity is well under way, implemented in more than half the
U.S. states.
Case in Point
CALIFORNIA ELECTRICITY DEREGULATION
California was among the states in the forefront of electricity deregulation. Economists
recognized that there were many potential suppliers of generating capacity and
many potential retailers of electricity services. The only natural monopoly was in
the transmission between the generators of electricity and the retailers. Breaking
up the old electricity companies, which integrated all these functions, could lead to
competition in all areas except transmission. Increased competition in the parts of
the system where it was possible would lead to greater efficiency, and ultimately to
lower prices and better service—or so it was hoped.
In 2000, deregulation appeared to be a disaster: electricity prices soared,
shortages of generating capacity led to brownouts and interrupted service, electricity
companies went bankrupt, and a massive government bailout was needed.
Clearly, things had not gone as planned. Not surprisingly, there was plenty of
finger-pointing. Critics blamed deregulation. Proponents said that even with
Shasta Dam is a hydroelectric facility in California.
298 ∂ CHAPTER 13 GOVERNMENT POLICIES TOWARD COMPETITION