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Monday, October 31, 2011

Beacon Power Bankrupted by Regulations

Beacon Power is a good example of a company going bankrupt due to interference by regulators. Beacon received a $45 million loan from the federal government. Meanwhile, regulatory agencies slashed the prices that Beacon could demand for their services and effectively squeezed the company dry:
As a regulated industry, utilities were only allowed to pay a fixed rate set by government regulators for Beacon's services, the DOE said. The rate was not high enough for the company to survive. (source)
This is a clear demonstration that regulators do not know what is best for the energy market. The hidden cost of "low prices" and "rate regulation" is that companies margins are cut to the point that operations no longer bring in profits. At that point, it is more effective to close up shop and move to a different industry than it is to keep working in the same industry.

I say to you utilities regulators: Fie! Fie! Fie! Let the market decide what the price should be. The road to more expensive power is paved with your maladroit regulations. Sure you may push prices down in the short run with regulations, but when those companies go out of business as Beacon Power has, prices will go up.

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