A decade after competition was introduced in their industries, long-distance phone rates had fallen by half, air fares by more than a fourth and trucking rates by a fourth. But a decade after the federal government opened the business of generating electricity to competition, the market has produced no such decline.I don't know where Johnson is getting his figures on de-reg leading to such great savings for the consumer--those mindless, faceless people out there somewhere who gobble up everything Mr. Moneybags glops on their economic plates--but it must be in 1980's dollars, when the de-reg mania began, because my long-distance bill seems no cheaper to me now that it did twenty years ago. So what's up with electricy deregulation? It has failed to deliver on the promise of lower utility bills. But why?
The disappointing results stem in good part from the fact that a genuinely competitive market for electricity production has not developed.
So how does government and industry make selling wholesale electricity to retailers competative? By its very nature the generation of electric power is a centralized activity. And nobody, but nobody wants an electricity generator plant built in their back yard. Johnson obliquely hints that deregulating electricity generation may have been a bad idea from the beginning. But there have been big winners in the electricity game, namely the big brokerage house of Goldman Sachs and defense/security leverage-buyout specialists The Carlyle Group.
Such investors have in some cases resold power plants they just bought, making a large profit. In other cases, investors have bought power plants from the utilities at what proved to be bargain prices, then sold the electricity back at much higher prices than it would have cost the utility to generate the electricity.Yet after all the chicanery and all of the skullduggery and screwing of the general public in states where electrical utility re-reg took place in the last ten years, Johnson can still find plenty of defenders of what should be indefensible. What is left out of the discussion is the simple fact that electricity, like a clean potable water delivery system, is necessary for the functioning of twentith century society. It is not something many people would choose to live without. In our "post-industrial," "post-modern" society one can survive adequately without recourse to an automobile. But without electrcity, to put it in the crudest vernacular, you are fucked.
Of course there is a silver-lining for the investor class. Concludes Johnson:
A study issued in June by the Edison Foundation, which represents investor-owned utilities* concluded that utilities would have to raise rates to upgrade local distribution systems and to finance long-distance transmission lines, as well as for new power plants. The study found that utility profit margins had thinned and financial strength had weakened. It called for relief in the form of higher rates.You see the "*investor-owned" electrical utlilties will still show a profit in the form of higher rates. Alls well with the world, save for welfare mothers and pensioners about to be forced out in the cold.
The appellation "*investor-owned," which I've asterisked in the above quotation, is the utility industry's cagey, dodge of making ownership appear as if it is spread out to a great number of small, mom-and-pop investors saving up for retirement. The reality is that while there are legions of small investors their holdings do not in any way shape or form match up to the shares of stock held by major investors. For example self-made billionaire, Warren Buffett, holds the lion's share of the electric utility sucking the marrow from my bones, MidAmerican Energy. However on the company's Web site, on a webpage coyly titled "About Us," there is nary a mention, even in passing,of Buffett's overlordship.
Capitalism does somethings very well. However generating and distribution electrical energy is not one of them.