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Paul Krugman explains how Texas exposed the dark side of 'free-market fundamentalism'

February 24, 2021 in Blogs

By Alex Henderson

The deregulation of Texas’ energy market has been a badge of honor among Lone Star Republicans, but with millions of Texans having recently found themselves without electricity, heat and running water during freezing temperatures and blackouts, many liberals are aggressively questioning the wisdom of that deregulation. One of them is economist and New York Times columnist Paul Krugman, who slams the “Texas power debacle” as a tragic example of why deregulating the energy market in the way that Republicans did in Texas is a terrible idea.

“The collapse of the Texas power grid didn’t just reveal a few shortcomings — it showed that the entire philosophy behind the state’s energy policy is wrong,” Krugman writes. “And it also showed that the state is run by people who will resort to blatant lies rather than admit their mistakes.”

Krugman adds that although Texas “isn’t the only state with a largely deregulated electricity market,” it has “pushed deregulation further than anyone else.”

“There is an upper limit on wholesale electricity prices, but it’s stratospherically high,” Krugman explains. “And there is essentially no prudential regulation — no requirements that utilities maintain reserve capacity or invest in things like insulation to limit the effects of extreme weather.”

To make matters worse, some Texans have been slammed with sky-high energy bills — which, Krugman stresses, shows that electricity should not be regulated the way avocados are regulated.

“Texas energy policy was based on the idea that you can treat electricity like avocados,” Krugman observes. “Do people remember the great avocado shortage of 2019? Surging demand and a bad crop in California led to spiking prices, (and) nobody called for a special inquest and new regulations on avocado producers….. But kilowatt-hours aren’t avocados…. Having to go without avocado toast won’t kill you; having to go without electricity, especially when your house relies on it for heat, can.”

Krugman notes how high some recent energy bills have been in Texas. For example, the New York Times reported that Scott Willoughby, who lives in a Dallas suburb, received an electric bill for $16,752.

“At first, those Texans who didn’t lose power in the big freeze considered themselves lucky,” Krugman notes. “But then the bills arrived — and some families found themselves being charged thousands of dollars for a few days of electricity. Many families probably can’t afford to pay those bills; …read more


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