Electric Monopolies

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.

3 Responses to Electric Monopolies

  1. Forrest says:

    The consumer should have choice of power generator much like the choice I enjoy with natural gas. Midwest maintains the lines, connections, and billing. I get to shop for best value power.

    • Bob Hance says:

      Actually Forrest what you have described is the active customer choice program in Michigan. Currently the legislature is reviewing the program for its successes and failings and will consider modifications. The Michigan choice program had a ceiling of 10% of total sales from the regulated electric incumbents. Interestingly Southwest Michigan never had a licensed alternative provider.

  2. Forrest says:

    I was listening to John Shelk president and CEO of the Electric Power Supply Association, whom claims Michigan consumers are getting a raw deal as the state limits power choice to only 10% of the market, ten thousand customers on a stand by list. Illinois has no such artificial limit. Just recently city of Chicago published report of saving consumers 25% on electric bill by fully employing open market choice.

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