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Power at Any Price 

The real cost of California Governor Davis’ plan for “cheap” power will be our rights.

By Scott D. McDonald (photo)
The Center for the Advancement of Capitalism

Last Thursday, in a response to President Bush’s energy plan, Governor Gray Davis declared that the state of California is “in war with energy companies.” By attacking the producers of energy, he has demonstrated a fundamental misunderstanding of the roots of the energy crisis and arrived at “solutions” that are doomed to aggravate the situation.

As Governor Davis pointed out, no electricity infrastructure construction has taken place in the past twelve years. What he failed to mention, however, was that this dearth of activity was not the result of a lack of desire on the part of energy companies, rather—at the behest of the governor’s allies such as Greenpeace and the Sierra Club—it was imposed on the power producers by the state. In short, the current crisis is the result of exactly the sort of action Davis wants brought to bear—governmental regulation to prevent the producers from responding to the market.

Several decades ago industrious individuals figured out how to generate and transmit electricity. This was the result not of miracles, but of mental and physical labor. In a free society—one absent of coercion—we reward this type of value creation by purchasing the product of that labor on the open market. Price fluctuations ensure that producers produce enough to satisfy consumers and are justly compensated for their product by those willing to pay the market price.

As a result of state regulatory restrictions on building new power plants, however, producers were forced to forgo plans to build the capacity required to meet growing demand. Consequently, demand has outstripped the producers’ ability to supply energy. Prices have risen not out of an evil plot to fleece consumers, rather because consumers demand power and are willing to pay for it.

Many now argue that these prices are too high and complain they are being gouged, however, they continue to consume. Prices have not yet reached the level at which consumers choose to go without power. Essentially, energy is trading at a fair price: any price at which the seller is willing to sell and the buyer willing to buy. This does not imply that the buyer is happy with the price, only that he would rather pay than go without the commodity. Furthermore, the producer does not force the consumer to buy the power; if he so chose he could go without or reduce his consumption. No wrongs have been committed and no rights violated.

Davis, on the other hand, is not satisfied with a fair price; rather, he seeks cheap energy as an entitlement and reelection in 2002. To “remedy” the situation he has threatened producers with a “windfall profits tax” and plant seizures. Meanwhile he is calling on the Federal Energy Regulatory Commission to implement a price cap on wholesale energy prices. What these “remedies” represent—aside from rampant collectivism—is an adolescent desire to eat one’s cake and have it as well.

Essentially, Davis and those like him want the benefits of a modern civilization without paying the costs. Instead, they want to use the producers as pack mules: ridden to death and blamed for all of our woes. If humans were treated in this manner we would call them slaves: those forced to sell their labor at the price dictated by their masters. That the slave still gets a loaf of bread or the producers still earn a profit is irrelevant. They have ceased to live as free beings—their rights vanquished—and now live at the whim and pleasure of those in power.

By allowing Davis to use the coercive force of government to control the power industry, we provide a moral sanction to the government’s usurpation of our rights. As the use of force against citizens increases, the government ceases to serve the protection of our rights and we begin to serve the government.

The freedom loving citizens of the republic must not stand by as Governor Davis leads the enemies of the producers in a drive to punish ability and dig us deeper into the regulatory pit. Davis wrongly seeks to procure cheap power at any price, even if that entails running roughshod over the very rights he has been entrusted to protect. Contrary to his opinion, the actual cure to the current ills of the market is to make it freer, not less so. Those who love liberty must advocate for an energy policy that removes government from the market and upholds the sanctity of individual rights.

Mr. McDonald, a resident of Fremont, California, serves on the Board of Directors of the Center for the Advancement of Capitalism (