Monday, December 04, 2006

Because they can, regional edition


For the second time in five months, hundreds of thousands of households (including mine) in eastern Missouri and western Illinois have experienced multi-day blackouts -- and while I'm always ready to "rough it" for a few days when necessary, this is not a minor matter. People died for lack of electricity in July, and people died for lack of electricity this weekend.

The natural first tendency is to demand that someone "do something" about Ameren UE, the utility company that can't seem to keep the damn lights on. Maybe something does need to be "done," but I doubt that most people have a good idea of what.

Let's start from the beginning:

Yes, Ameren UE is a monopoly -- or more specifically it has a monopoly on one service: The provision of alternating current over a large, ubiquitous network of power lines in a particular region.

Ameren UE doesn't have a monopoly on electricity per se -- barring interference from one's local political hacks, one is free to install solar panels or a wind turbine or whatever and tell Ameren to keep their juice. I'm thinking about doing one or both of those things myself.

The ability to do those things (even setting aside the fact that, at the moment, they're more expensive than just paying Ameren, especially with respect to up-front investment) isn't really relevant, though. This is still not a free market. By law, no other company may purchase easements, stick some poles and lines on those easements, and go into the business of pushing alternating current over those lines to paying customers in what government has declared to be Ameren UE's domain.

I discussed the problems of faux-"privatization" with a state-oriented leftist friend of mine this weekend, while we sat around the table in my dark, unheated kitchen. Not surprisingly, we both concluded that faux-"privatization" hits customers with the worst effects of both the private and public sectors (although, as you might imagine, we differed on what to do about it).

For its part, Ameren UE wants to make a profit. Fair enough -- that's what businesses go into business to do. However, the business environment in which it seeks its profits is an artificial one.

In a real free market environment, competition is an omnipresent factor. Even if nobody is actually competing with you at the moment, someone will start competing with you the instant it looks like it can be done so profitably. You either have to beat your competitors, or perform so satisfactorily to your customers that prospective competitors don't bother to challenge you.

For government's part, in a government-conferred monopoly environment, "public utility commissions" are created to protect the customers ... but they can't do so nearly as well as real competition would. These commissions set rates and rules, but being political entities they are subject to political influence. Who carries more influence with such commissions:

- A centralized business with a single agenda and an overriding interest in those commissions' operations? Or

- A diffuse base of customers with varying agendas, most of whom usually have "utilities and utility bills" way down their lists of priorities?

Ameren UE and companies like it put a lot of money into buying political influence, and that influence is relentlessly used for the purpose of securing the company's profits. Most of Ameren UE's customers don't think much about the politics of utilities until the lights go out ... and even if they did, it would take quite an effort to put together an effective lobbying operation on behalf of those customers as a group with a common interest (especially since those customers can't bill Ameren UE for the costs of lobbying, as they bill us).

Ameren UE is free to let its infrastructure decay while it takes profits, to minimize its investment in upgrading that infrastructure, and to cut back its work force so that it has bare minimum staff in normal times and not nearly enough when a storm comes through. It's free to do so for two reasons:

- Because you and I aren't allowed to call up Ameren UE and say "screw you -- I'm switching to Acme Power and Light. Come get your meter out of the way so they can put theirs in;" and

- Because big business naturally has more influence than small customers over the governmental bodies which are supposed to pinch hit for that kind of competition.

Many "progressives" believe that the remedy to such situations is to somehow untangle government power from corporate influence, but history shows us that that's a naive expectation.

It was not customers who called for government control over utilities in the early 20th century -- it was the utilities themselves! See Jan Bellamy's "Two Utilities are Better Than One," in Reason magazine for more historical information.

From anti-trust to the Food and Drug Administration to your local utilities, government regulation has nearly always been pushed and promoted by the entities allegedly to be reined in or controlled ... because those entities knew that it would ultimately be they who held the reins and sat at the controls, or stood over the shoulders of those who did. Regulation would not be permitted to hurt their bottom line -- rather it would enhance it by allowing them to exclude would-be competitors and thus free them from the market's tendency to force better service and lower prices.

Regulation is not a tool of self-defense for consumers -- it is a tool of monopolization for corporations. Faux-"privatization" is particularly pernicious: When the inevitable failures occur, it allows the regulators to falsely blame, and the regulated to falsely cite, the "free market."

The solution is not, as some will no doubt advocate, more government control over Ameren UE. It is less government control -- less government, period -- for Ameren UE and other anti-competitive firms to exploit and influence to their own benefit and their captive customers' detriment.

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