public utilities continued

There was a lot of blow-back to my public-utility-as-monopoly post from last week.  The common response (not including health-care comparisons) can be summed up in three parts – infrastructure concerns; deregulation concerns; and “if it’s not broke, don’t fix it.”

One by one, now…

• First, public utilities are awful examples of government-sponsored monopoly.  All the infrastructure demands and other complications of utilities make competition impossible.  After all – how can you have a competitive market if each company has to lay down their own water lines, gas-pipes, etc?

The infrastructure concern is a really valid one.  But I don’t think anyone is suggesting that each gas company lay their own gas-lines, or that each water company should run their own pipes.  It’s almost inconceivable that each house would have to be re-fitted based on the utility provider they chose.  I think rather we begin to enter into the area that Chris has described as “the Commons.”  Maybe.  The way I think about gas lines and water pipes and power lines is similar to how you might think of roads.

Roads are pretty much the jurisdiction of government and that’s fine.  Commerce takes place on these roads.  Pizza drivers use them.  So do postal carriers and trucking companies and soccer moms and commuters.  Simply because they were paved by the government and paid for by taxes doesn’t make them the sole property of anybody really, anymore than a power-line is.  I see no reason at all that multiple power companies couldn’t compete to provide electricity over public lines.  You’d still have the one set of lines, but you’d have multiple competitors using them, and contributing to their upkeep.

• Second, deregulation of utilities, (see: California circa 2001) leads to disaster, rolling blackouts, and other horrors.  Utilities are simply too important to be left to the whims of the market – that whimsical beast.

With all due respect, this is simply nonsense.  The problem was not deregulation, it was government price-caps on energy costs.  Utility companies could make more money shipping power out of state than keeping it in state.  In fact, the only way for utilities to remain in business given tight price controls was for utility companies to sell to other states which led to a shortage at home.  In a truly deregulated market prices would have reflected supply.  In fact, this would have led to people conserving more power rather than using up energy that was priced artificially low by the state.  Truly deregulated markets would reflect actual prices and force people who used too much power or water or gas to scale back usage.

If you want to see real rolling blackouts, keep costs artificially low through government intervention, which will also keep innovation to a minimum.  Who needs to invest in alternative energy if existing energy is kept cheap and reliable?

• Third, the way things are is pretty good.  Water comes tumbling forth when you turn on the tap; gas is there to cook or heat with unless you don’t pay.  Electricity is cheap and reliable.  All is well with the current system, so why shake things up?  In other words, I’m just bitching needlessly about a perfectly acceptable system.  Which is fair, since most people don’t really think much about their utilities.

Then again, the fact that there is little to complain about does not indicate it is the best possible system.  Californians in the run-up to the 2000/2001 energy crisis loved the cheap rates they were getting.  Venezuelans love Hugo Chavez because he keeps their gas prices low, too.  We all love Barack Obama because he promises he won’t raise taxes on 99% of all Americans (read my lips!). Cost controls on basic necessities can make people happy.  But happy doesn’t mean “good” or “best.”  In fact, it often indicates unintended consequences – like the damage caused to the environment by artificial price-caps on energy.

Now, beyond all of this, it just seems to me that we’re not exploring the alternatives enough – that we have sold our imagination short and that we’ve become rather complacent and resigned.  We say, well utilities have always been this way.  It works.  Why change it?  What we don’t realize is that we’re entering a new age of autonomy and the possibility of creating our own energy is becoming a reality (again).  We can set up our own wind-turbines.  We can have a self-heated water tank installed on the roof.  We can put up solar panels.  We could start energy-cooperatives or private companies to sell some of our excess energy – of the renewable and greener variety.

Except, of course, we can’t.

All we can do with that energy is sell it back to the public utility at whatever cost they want to pay us.  Even though, you know, it’s our energy.  We harnessed it.  We invested in it.  We just don’t need it all, so maybe we want to give it to our neighbor or sell it to the outlet mall down the road.  Instead we are forced to give it to the utility and they pay us some predetermined amount for it.  This is then redistributed to the poor.

Right?

The point is, there are other possibilities.  And if we try them out, the world won’t come crashing to its fiery end (rolling blackouts notwithstanding).  I’m not advocating lawlessness.  I’m just saying that if Company A controls all the water supply, and Company B thinks maybe they can do it better, well why not?  Why should the government protect Company A?  I know we think the government is protecting us but they’re really only protecting Company A.

I say build another water tower.  Use the same “commons” to deliver the H2O itself.  Help pay to keep up the lines.

Maybe service will improve if only imperceptibly.  Maybe savings on taxes will be diverted to other things like education.   Maybe what will happen is that water will get more expensive as prices begin to respond to supply and demand.  Instead of the taxes drawn from your paycheck to feed anonymous programs, you’ll have a higher utility bill.  You’ll realize what it is you’re paying for that much more.

And maybe in places like the Southwest, water should be more expensive.  I mean, nothing will ever teach conservation like having to pay for your own waste.  Nothing.  And nothing will work so elegantly as the natural prices of scarce resources.  Taxing, fining – all of those government favorites – they don’t hold a candle to supply and demand.  So markets can be good for the environment, too, but that’s an “unseen” thing.  Because people don’t think about their utilities, and they’re perfectly happy with how the price-controls set on water, gas and electricity don’t limit them in any way.

Maybe this will change as we begin to realize that we can harness our own power, unless they keep telling us it’s not really ours to begin with.  Then maybe we’ll have to learn the hard way – that we have to pay for what we get.

Exit question – would Americans elect Hugo Chavez if he promised them gas at .10 cents/gallon?  That is, if he could provide a birth certificate….