I am sufficiently green to believe that energy subsidies are wrong in every way it could possibly be wrong. So in my view low energy prices are not a good thing unless these prices reflect the cost of energy production and transmission including environmental costs. On the other hand I am not so green as to believe that high energy prices is in itself desirable.
It is easier to achieve these goals in a deregulated than in a regulated market. Before deregulation some parties had abnormally low energy prices, prompting them to waste energy. Now they have an incentive to save energy and send the surplus energy to the market.
How deregulation is done matters. The system must allow for maintaining and improving the needed infrastructure, otherwise power outages may become the rule as the grid deteriorates. Much of the European grid is dangerously close to capacity. On the consumer side it must be easy to switch provider. Again using Norway as an example very few Norwegians do that, giving the companies greater opportunities for higher prices and profit.
Whether private or public ownership is better is a matter of political opinion. If the local/national government is a responible owner, and that the market is truly deregulated, I see no harm in them owning the resources. OECD on the other hand has critisised Norway for high public ownership.
I fully agree with your comment that prices should reflect full energy costs (including externalities) but not necessarily more.
I do disagree that deregulation is the best way to achieve this. Externalities, by defintion, can only be internalised through regulation. Safety margins in the network, spare capacity, spinning reserves, etc... need to be defined and regulated and enforced.
Private electricity producers also have a structural preference for power sources with lower investment costs, as they are the easiest to build profitably, as variable costs are easier to pass through in market prices, and interest costs are higher for the private sector. Thus coal and gas fired plants are encouraged by private ownership, unless stringently regulated for their carbon emissions.
There are so many side effects of each aspect of regulation that a public, unified system increasingly appears to me to be the wisest solution and, as France shows, the cheapest as well. In the long run, we're all dead. John Maynard Keynes
Deregulation shouldn't mean just throw the energy grid to the wind and let the market sort it out. But it should give wasters of energy a way to save energy and sell it to more deserving users (if they own it), and it should allow consumers (industrial or domestic) to really choose provider to prevent price gouging.
Most externalities can be handled by taxes and other fees, pollution taxes, paying for loss of capital for non-renewable energy sources, or rent for renewable sources (hydroelectric plants takes away a waterfall, solar and wind plants occupy non-neglible parts of the landscape). A hefty carbon tax, which is likely, will prevent inefficient coal power plants (it isn't a given that coal power plants are polluting, the current ones are, but it is at least in theory possible to have clean coal power, it is just that until now there has been no reason to look for it).
Some parts are hard to handle well, maintaining a power grid that can handle the strain, but not being excessively intrusive or expensive, may be hard to do for any entity, public or private. The profitability of a solar plant is fairly easy to calculate, you have an initial investment, you pay rent for the land, and the variability is what the energy prices will be in its (relatively short) lifetime. A nuclear plant is harder to calculate, it has a very long life span from construction to decommission, there is the small but real risk of a disaster, the cost of fuel is unpredictable, and desposing on the used fuel is another unknown.
