Welcome to Common Sense Weekly! This is the Commonwealth Foundation's weekly news roundup of policy issues being debated in Harrisburg and across Pennsylvania.
Harris’s Price Controls Ignore Basic Economics
Vice President Kamala Harris wants to make groceries cheaper. However, her vague proposal to ban “price gouging” will have the opposite effect.
Economists, not known for consensus, agree on one thing: Price controls don’t work. By mandating price ceilings, government price controls always lead to shortages.
And this isn’t some abstract economic theory; instead, it’s a real-world observation of their historically bad track record.
Troubling Times Are Ahead for American Energy
If you thought your energy bills were ridiculous this summer, a recent power market auction indicates things will only worsen.
Every year, PJM Interconnection, the nation’s largest electrical grid operator, hosts an auction where buyers and sellers bid on contracts to generate electricity. Last year, prices were, on average, $28.92 per megawatt-day. This year, they hit $269.92 per megawatt-day—an 833 percent increase!
As a result, residents in the PJM region, which covers 13 states (including Pennsylvania) and the District of Columbia, should expect their electricity bills to increase. Exelon, the largest U.S. electrical parent company, anticipates a double-digit increase in utility costs—some as high as 24 percent in states like Maryland.
So, why are these prices soaring? Manu Asthana, PJM’s president and CEO, said, “The significantly higher prices in this auction confirm our concerns that the supply/demand balance is tightening across the [region].”
‘Greedflation’ Is High-Priced Baloney
Since year-over-year inflation cooled to 2.9% in July from its 2022 peak of 9.1%, a search has begun for the culprit of the original inflation boost. Some politicians blame what they call “greedflation” or corporate “price gouging.” The truth is that government economic intervention was the problem, and free-market policies are the only remedy.
If greedy businesspeople were responsible for price increases, then slowing inflation would mean they are becoming less greedy. But while producers often think they can set prices, they rarely can. It isn’t because they aren’t greedy—they always try to change prices. It’s because they can charge only what the market will bear. It takes two opposing sides to make a deal, and consumers always look for a bargain. If the buyer won’t buy, the producer must lower the price or forgo the sale.
PA Grid Operator Pays 700% More to Buy Power, Warns Price Hikes Will Follow
Red lights are flashing at one of America’s largest electricity transmission operators over possible power outages after it was forced to spend 700 percent more to buy power for its customers in the latest auction.
“The significantly higher prices in this auction confirm our concerns that the supply-demand balance is tightening,” said PJM President and CEO Manu Asthana.
It’s quite a shock for a nation that leads the world in natural gas and wind power production and ranks second in solar electricity.
In recognition of Labor Day, we'll soon be releasing the fourth edition of our popular 50-state labor report! Be sure to check out the latest episode of our labor podcast Disunion: The Government Union Report.
