1. Case Study: Shocked by the high price of electricity
2. Idea: Benefits of natural monopoly.

Historically, electric utilities in the United States were recognized as natural monopolies. A utility serviced a defined geographical area and owned both the plants that generated electricity and the transmission lines that delivered it to retail customers. The rates charged customers were regulated by the government, set at a level to cover the utility's cost of operation plus a modest return on capital to its shareholders. Beginning in the late 1990s, however, there was a move toward deregulation, based on the belief that competition would deliver lower retail electricity prices. Competition occurs at two junctures in the channel from power generation to retail customers: (1) distributors compete to sell electricity to retail customers, and (2) power generators compete to supply power to distributors. That was the theory, at least. By 2016, only 16 states had instituted some form of electricity deregulation, while 7 had started but then suspended deregulation, leaving 27 states to continue with a regulated monopoly electricity provider. Why did so few states actually follow through on electricity deregulation?One major obstacle is the lack of choice in power generators, the bulk of which still entail large up-front fixed costs. In many markets there is only one power generator. Although consumers appear to have a choice in their electricity distributor, the choice is illusory, as everyone must get their electricity from the same source in the end. And in cases in which there is actually choice in power generators, there is frequently no choice in transmission, which is controlled by monopoly power line companies. In fact, deregulation can make consumers worse off when there is only one power generator because of the potential for the power generator to engage in market manipulationintentionally reducing the amount of power supplied to distributors in order to drive up prices. The most shocking case occurred during the California energy crisis of 2000-2001 that brought blackouts and billions of dollars in electricity surcharges to homes and businesses. On audiotapes later acquired by regulators, workers could be heard discussing plans to shut down power plants during times of peak energy demand, joking about how they were "stealing" more than $1 million a day from California's electricity consumers. Another problem is that without prices set by regulators, producers aren't guaranteed a profitable rate of return on new power plants, subjecting them to far more risk. Many new power generators took on high debt levels to build their plants, then went bankrupt when demand did not rise to the level that would support their debt. As a result, new power generator builders are demanding much higher prices before they invest. And in states with deregulation, capacity has failed to keep up with growing demand. For example, Texas, a deregulated state, has experienced massive blackouts due to insufficient capacity, and in New Jersey and Maryland, regulators have intervened to compel producers to build more power plants. Lastly, consumers in deregulated states have been subject to big spikes in their electricity bills, often paying much more than consumers in regulated states. So, angry customers and exasperated regulators have prompted many states to shift into reverse, with Illinois, Montana, and Virginia moving to regulate their industries. California and Montana have gone so far as to mandate that their electricity distributors reacquire power plants that were sold off during deregulation. In addition, regulators have been on the prowl, fining utilities in Texas, New York, and Illinois for market manipulation.

Questions to answer

1), Briefly explain what the case study is about, summarize it