Why electricity supply stays artificially scarce

Why is it so hard to build enough electricity supply to meet surging demand? A new draft paper from Joshua Macey and Lynne Kiesling argues that the current regulatory system creates perverse incentives for incumbents to keep supply constrained. Utilities that own both transmission and generation have reason to slow-walk competitors in interconnection queues or hold up new transmission. Incumbents control planning processes and cost allocation, deciding where new lines get built and who pays. And rate-of-return regulation rewards capital spending rather than system performance. The fix, they argue, is to separate out the parts of the system that are still true natural monopolies and reintroduce competition in the parts that aren’t - reducing opportunities to “ration by process rather than price.”