- The Washington Times - Wednesday, March 28, 2001

The year was 1859, and the United States was in the midst of an energy crisis. Whale oil, used by most Americans to fuel their lamps and light their homes, had soared to nearly $1.50 a gallon. Heavy demand was threatening to make the worlds sperm whale population extinct. But the federal government did not take over the "shipping grid" or slap whale price controls on producers. Instead, the marketplace was allowed to work. And later that summer, on a farm outside of Titusville, Pa., Col. Edwin Drake and his partners discovered a whale oil substitute buried beneath 70 feet of rock.
By striking oil, Drake changed the world of energy overnight and saved more than a few whales lives in the process. He also proved an important point: Americas single best source of energy is its bottomless reserve of freedom. Marketplace solutions work, and must be the linchpin of our energy policy.
And Ill offer Pennsylvanias experience as Exhibit A. We were one of the first states to bring choice and competition to the electric industry. Now were the nations leader. By May, more than 900,000 Pennsylvanians will have shopped for power by far the most in the nation. And the benefits to consumers are real. Before choice, Pennsylvanias electric rates were 15 percent higher than the national average; now theyre below average.
Consumers and businesses have saved over $3 billion. One consortium of 350 public schools saved $23 million by buying electricity in bulk. Above all, power continues to flow uninterrupted. Said Ken Malloy, president of the Center for the Advancement of Energy Markets, "Pennsylvania shows that electric competition can work if done thoughtfully and carefully."
Is Pennsylvania a special case? Much as Id like to think so, the answer is no. Marketplace solutions are not unique to Pennsylvania. The dream of energy deregulation can become a reality in all 50 states if the right principles are applied.
Unfortunately, California has had a different experience. Under Californias "deregulation" plan, retail prices for electricity were capped while wholesale prices soared. Utilities were forced to sell their generation assets and prohibited from buying electricity at cheaper, long-term rates, preventing them from making up the difference. At the same time, the construction of new power plants was halted by regulations and red tape, closing the door to alternate sources of energy. As a result, power companies lost more than $13 billion and customers found themselves subjected to rolling blackouts.
The marketplace didnt abandon California; California abandoned the marketplace. Nevertheless, it became fashionable to blame the energy crisis on deregulation. Gov. Gray Davis called deregulation "a colossal and dangerous failure." His answer has been to plunge state government into the power business. Taxpayers already have spent $3.2 billion on state-purchased electricity in little over two months. With blackouts expected again this summer in the Golden State, the pressure will be great to get government involved in the energy market. Already Western legislators have co-sponsored a bill to require the federal government to impose wholesale price controls.
The Bush administration should resist. I am strongly encouraged by the presidents opposition to federal price controls and his emphasis on energy diversification. I believe he intuitively knows the lesson of Pennsylvania namely, that the marketplace works. Before our elected officials abandon the marketplace in a panic at the thought of another long, hot summer, they would be wise to remember that summer of 1859 when American ingenuity struck a Pennsylvania gusher and changed the world forever.


Tom Ridge is governor of Pennsylvania.


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