Here is another in what I hope will be a series of attempts to debunk myths about the free-market perpetuated by both the right and the left. The first entry was about school vouchers and how applying the "free market" to education in the way usually suggested by the Republicans won't do what they say they want it to do. This entry will address the issue of utilities, especially electricity, and "natural monopolies."
The Republicans argue that electricity is and should always be a "natural monopoly" in which it is most efficient for one company to provide the electricity for everyone. The idea is that since the biggest production cost is wrapped up in building the power plants and the transmission lines, there are such enormous "economies of scale" that competition won't work. As Homer Simpson once said, "Well that will work 'in theory.' And Communism works 'in theory.'"
Second, the Republicans assume that there is no alternative to the costly, centralized power generation scheme we have now. However, (and Dr. Strangelove will have to fill in the details) the technology exists to shift much of our reliance to solar power at least for residential needs in the parts of the country with the fastest population growth. In other words, the so called "economies of scale" that the natural monopoly theory relies upon are considerably less important now than 30 years ago.
So here is my progressive market based alternative. The government would take over transmission lines completely. Private power companies would be free to build and maintain enormous power plants which would produce most of the power for industrial/commercial use. Residential home owners would be encouraged through tax breaks to put solar collectors on their roofs. Any excess power they produced could be sold back to the government controlled transmission grid and resold. This would seriously reduce the monopolistic grip the current group of private power companies have.
Dr. Strangelove gave us a great comparison of alternative energy sources a while back. I'm wondering if he could reprise that with particular attention to technologies that would enable small scale power production.