Alas, the situation is quite different in monopoly markets, where utilities face little or no competition. They recover their costs through rates set by state regulators, not by operation of a market. The Southeast is one section of the country that is especially problematic. There, big utility holding companies like Duke Energy and Southern Company jealously guard their monopoly fiefs.
Duke just released a plan suggesting it wants to build at least 10 new gas plants in the Carolinas. Southern Company — which owns utilities in Alabama, Georgia and Mississippi — also wants to build large new gas plants, though it has yet to reveal the exact number. The Tennessee Valley Authority, a federally owned corporation that is also a de facto monopoly and supplies power to seven Southern states, plans to build up to 11 gas plants.
At risk here is not investor money, but the wallets of people who live in the Southern states. Once these plants get built, customers will be forced to pay for them even if they shut down early.
It is not too late to stop these plants. Governors and regulators in the Southern states, and the board of the T.V.A., will not be doing their jobs unless they subject these proposals to rigorous scrutiny. Citizens should demand it.
Superior options are available. For starters, the Southern utilities need to commit to moving much faster on clean energy. They also need to do a far better job of trading power across state lines. A recent study by Energy Innovation, a research group in San Francisco where one of us works, and Vibrant Clean Energy, a company that does sophisticated modeling of power systems, found that a robust wholesale power market in the Southeast could save customers $384 billion between now and 2040, while avoiding most new gas plants.
Details of such markets can be complex, but the basic idea is simple. If power is available from an existing power plant in, say, South Carolina, why should customers in Georgia pay to build a new, duplicative plant, or vice versa?
Recent events in New Mexico show what can happen when power companies are asked to weigh all options.