So, in my now nearly 40 year career in this business I’ve fielded a virtual gob of questions. Probably the one that is and has been the hardest to fully clarify is the monopoly question. After all we take the opportunity to freely choose how we spend the most of the rest of our money. So, why not with electricity. As hard as this is for me to say sometimes the wisdom of regulators is under appreciated.
Many years ago decision makers understood that providing electricity to everyone would be an expensive undertaking. This would be especially true in remote and rural areas.Frankly the capital commitment in rural America was so big the early utilities were unwilling to expand there. Regulators and Legislators, to ensure that everyone would be afforded access to this truly life changing product and service, worked to develop needed incentives.
But not only did they need to find the financial encouragement for utilities to commit enormous capital but also to prevent the overbuilding of systems. The wisdom was and still is that building multiple systems is inefficient, expensive, unsightly and just bad “public” policy. None of us would have wanted the littering of our national landscape with more poles and wires! How to encourage investment then in the public domain to cause critical infrastructure to be built without a promise of reasonable returns?
Government and utilities reached a bit of a regulatory compact which by definition preserved a monopoly status where facilities were put in place to serve. Utilities were protected from others coming in to duplicate which ensured their investments would result in a predictable payback. However with that protection utilities agreed to the provision of providing to everyone – an obligation to serve.
Sometimes policy makers get it right.