Many people complained about the Council of Ministers passing a new executive order on electricity rates for 2006. The average rate will jump 4.48 percent for domestic consumption. This rate increase is being driven by three factors that have combined to raise the cost of production: higher oil prices and their impact on oil and combined cycle energy plants; a growing amount of credits and subsidies going to renewable energy production; and the soaring costs and inefficiencies (that is, the great waste) stemming from the Kyoto Protocol. These three factors are all products of other state interventions into the market.

 

We do not know what the price for electricity would be in a market free from state meddling. What we do know is that every time the state plays with prices it uses up valuable resources to produce relatively unimportant goods and services. In other words, state pricing wastes huge amounts of the good or service in question.   

 

This is why we ought not to complain about the average price of electricity going up 4.48 percent. We should complain for a different, but vitally important reason. It is insulting that the greatest waster, the interventionist state and its arbitrary price fixing, has slipped into this executive order a system to penalize consumption to, supposedly, avoid waste. The more energy consumed, the more the consumer will have to pay.   

 

Avoiding waste has little or nothing to do with this. People do not dedicate their time to wasting electricity. What they do is use it for those activities they value enough to pay the necessary costs to make them a reality. And since the value given to each specific use is subjective, it is impossible to say that one person’s use is more important than another’s. Therefore, the only way to reduce wasteful use of electricity is to liberalize its production, its pricing and allow each consumer to judge which of his or her goals most urgently demand paying the market price.

 

True waste is almost always the byproduct of some political intervention in the market. In our case, the state has decided to make electricity (among the most important goods for economic development) artificially scarce by throwing up obstacles to its production. It then opted to play with its price, de-stabilizing the relationship between supply and demand. And, finally, the state calls us wasteful and wants to charge us for the outrageous situation it created. It is shameful to treat anyone this way, especially your own citizens, who work hard each day to live a little bit better consuming, in general, a little bit more electricity.