You can learn a great deal about a reform by watching who lines up to kill it. Before the American Legislative Exchange Council’s Energy, Environment and Agriculture Task Force, the electric utilities did exactly that. They spoke against a model resolution on Electricity Market Rationalization to bring free-enterprise discipline to wholesale electricity, and they defeated it.
CFACT helped bring that resolution forward, with Rep. Ken Ivory of Utah leading, and we are not finished. When the multi-state, publicly traded corporations that profit from the current system fight this hard to protect it, they are telling you exactly where their windfall profits are.
Here is what they were protecting: Wholesale electricity is supposed to be a market. In practice, it still runs on rules written for a world of local monopoly utilities, not you and me, and those rules quietly transfer billions of dollars a year from our families to electricity generators.
The resolution CFACT backed would fix three of the worst distortions, and it would do it the same way America fixed trucking, the airlines, and the phone companies: by letting real competition set the price.
The first reform is pay-as-bid pricing. Today, when the grid dispatches power, every generator is paid the highest price that clears the market, not the price it actually offered. A plant that runs profitably at $30 still pockets $270 when a costlier unit sets the price.
That windfall costs the average household more than $300 a year, and it has no place in a real market. Pay-as-bid simply pays each generator what it bid.
The second reform ends the socialization of transmission costs. Right now, the enormous cost of moving power across long distances, largely benefiting wind and solar, is smeared across every ratepayer, whether or not they benefit.
That hidden subsidy props up remote generation that could never compete if it had to carry its own delivery costs. Charge the cost to those who cause it and honest prices return. This is not a fringe idea. Federal regulators have already begun moving in this direction.
The third reform is real-cost bidding, and it is the one the subsidized generators fear most. A wind or solar plant loaded with federal tax credits can bid at or near zero and still turn a profit, which lets it undercut everyone and destroy the price signals a market depends on.
Our reform sets a floor. A generator must bid its true cost minus its subsidies. The subsidies do not disappear. Their value simply flows to ratepayers as lower bills instead of to shareholders as inflated profits. If we are going to subsidize an industry, the least we can do is have the savings reach the family paying the bill.
Put together, these three reforms would make wholesale electricity behave like every other deregulated corner of the American economy. Trucking, airlines, and telecommunications were all freed from cartel-style pricing, and all three delivered what competition always delivers: lower costs, more innovation, and better service. There is no good reason electricity should be an exception.
The reason it remains an exception is on full display. The present system is failing on its own terms. In the summer of 2024, the PJM capacity auction, which covers a large stretch of the eastern grid, saw prices jump more than 800 percent in a single year, and residential customers are now absorbing rate increases of 10 to 20 percent.
Americans are paying more and getting a grid that is less reliable, not more reliable. The market that produced those results should welcome reform. Instead, incumbents fought it.
It is worth noting that the same task force received two other CFACT-backed measures warmly. One would shield energy producers from expensive speculative climate lawsuits. The other would stop local governments from wasting public money on net-zero mandates.
Good ideas can advance. This one ran into a wall of utility opposition, which is precisely why it matters.
CFACT will keep working with legislators to carry this reform forward. The utilities have made their position clear. So have we. When the people who profit most from a broken market are the loudest voices against fixing it, that is not a reason to back down. It is the reason to press on.