I just finished reading the featured article in the Summer 2008 issue of The Objective Standard, “Property Rights and the Crisis of the Electric Grid” by Raymond Niles, and I can whole-heartedly recommend it.

I had always wondered how the electrical utilities evolved into their current dysfunctional state as quasi-governmental entities, and never understood why utilities didn’t function more like private providers of essential goods (like grocery stores or airlines). Niles traces the history of the electrical utilities from the 1880′s to the present time, and shows how the current problems with the electrical industry are the result of government interference with basic property rights from the very inception.

I was particularly interested in his account of the California “deregulation” fiasco of 2000-2001. Diana and I lived in San Diego at that time, so we experienced this crisis of skyrocketing costs and rolling blackouts first-hand. However, I couldn’t make sense of the newspaper accounts at the time, which generally blamed the “free market” for the problems. (For a typical portrayal of the events, this Wikipedia entry on the “California Electricity Crisis” is a good example of the conventional wisdom).

Fortunately, Niles is able to reduce this complex topic to its essentials, using property rights as the unifying theme. As an industry analyst, he has tremendous knowledge of the history, and is able to communicate it clearly to a lay audience. And besides offering a critique of the current system, he also articulates a positive alternative vision of a free market electrical system in which property rights are genuinely respected, and the benefits it could bring to producers and consumers alike.

Because his article is the featured free article, it is available to both subscribers and non-subscribers. So read the whole thing.

(On a personal note, I had the pleasure of meeting Ray Niles at the OCON 2008 conference a few weeks ago, and found him to be a thorougly intelligent, articulate, and pleasant dinner companion.)