Corporate Transparency and Energy Boondoggles.
Sunday, September 9, 2007 at 06:52AM
Toby Considine in Background, Markets and Innovation

There is an abstract interface already in place that most of us understand. It communicates scarcity and abundance. It allocates resources over time. It relays the comparative worth of alternate solutions. We call the interface “the economy” and we call the abstractions “money”.

When we interfere with the prices in the economy, we are deliberately miscommunicating value and scarcity. When we deliberately falsify communications, people will make the wrong decisions. Those decisions will be bad for the economy, bad for resource allocation, and bad, in the long term, for the person making those decisions.

I wrote last week (other-peoples-money-and-poor-decisions.html) of a proposed program in Wilmington, Delaware to offer reduced electrical rates for 5 years to new businesses setting up shop in the area. Each of these businesses is wasting time by putting off developing new business processes that use less energy. These businesses have self-identified themselves as being among those most in need of new processes by relocating to take advantage of the deal.

As a country, we have dedicated a lot of effort toward transparency in corporate governance. Many of the rules are bound in the Sarbanes-Oxley (SarBox) legislation and the resulting regulation. The aim of these rules is to require corporate officers to take responsibility for full and honest reporting of business practices and potential liabilities. The spirit, if not the letter, of the law should require these businesses to report their strategic failures and the anticipated costs of ignoring true energy pricing.

Most likely, the corporate officers will award themselves bonuses for short term profit goals, and be long gone before the costs of their decisions become visible. The activists who might be expected to protest will be blinded by the fulfillment of their progressive fantasies of job creation. And all of us will pay in continued high energy use, subsidized by the muddy thinkers of Wilmington, Delaware. Bad information leads to bad actions. Fully transparent pricing for electricity is the basis upon which good decisions can be made.

Technology has given us an historic opportunity for transparent energy markets. The Energy Bill of 2005 has spread the enabling mechanism of time of day metering across the country. We can now apply the most commonly accepted abstract interface to time of day allocation of energy resources. We should get past politics as usual to take advantage of it.

 

Article originally appeared on New Daedalus (http://www.newdaedalus.com/).
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