and the
Citizens Economic Research Foundation

Barbara's Biweekly Column

Don't Be In Dark Over Power Costs
by Barbara Anderson

The Patriot Ledger
Saturday, October 25, 1997

I like both electricity and deregulation, so obviously I like electricity deregulation. So what am I doing with Jim Braude in all those radio ads opposing the Harshbarger electricity deregulation settlement?

When I was approached by both Braude and the conservative Heritage Foundation to join a left-wing coalition against a consumer bailout of the utilities' so called "stranded costs," I refused on the grounds I knew nothing about the subject. But then the multi-billion dollar cost caught my attention, and I found the issue more interesting than I expected.

Once upon a time, electricity was considered too valuable for the free market, so the government regulated it. Surprisingly, we can still turn on the lights, though it costs more than it would if the government were not involved; this may be connected to the regulated companies having to give jobs to everyone in the local legislator's district who wasn't already working for the Hynes Convention Center, the Turnpike and the MBTA.

Eventually, both liberals and conservatives came to support competition that would give us a chance to choose an electric company just like we choose a phone company: whichever one doesn't call when we're in the bathtub. So far, so good.

It gets better. According to the Harshbarger proposal we will get a 10 percent rate reduction even if we don't shop around, at least at first. But why would the government guarantee the consumer a lower price? Doesn't the free market mean we try to find the best deal without government interference?

Not in this case. We are guaranteed lower prices for the first year because the utilities are guaranteed that we will pick up their existing losses, or stranded costs, for as many years as necessary. Old power companies insist they can't fairly compete if they are stuck with the residue of past bad investments, when their new competition is not. So no matter which we choose, we have to pay a kind of entrance charge to our utility that helps the old companies pay their old bills.

The latter argue that the reason they made bad investments is that the regulating government made them do dumb things. Since no one ever holds government officials accountable for dumb things, there is general agreement that the ratepayers will have to make up for the stranded costs that were caused by government.

But what about the bad decisions of utility executives? Nuclear power plants come to mind. During my Trekkie years I was very pro-nuclear, associating nuclear power with the Starship Enterprise. But while I was fantasizing about space travel, power plants were shipping hazardous nuclear waste by train. They couldn't get private sector insurance, so they lobbied the federal government for taxpayer-backed insurance coverage.

I asked a utility executive why Seabrook was built on an Earthquake fault; he said it was safe because, "there hasn't been an earthquake here in 100 years." Doesn't that usually mean the area is due for one, I wondered. Then, to further reassure me, we downwind Marbleheaders received our evacuation plan in case of nuclear accident: leave your pets, get in your cars and drive immediately to your assigned community in Western New Hampshire.

Considering that your can't get to New Hampshire or anywhere from Marblehead without driving through at least two cities, which, presumably are also evacuating, it was clear that the real plan was: bend over and kiss your behind good-bye. So for these and other reasons, nuclear plants didn't work out; the utilities say that if we don't pay all these stranded costs, they'll go to court and we can kiss deregulation good-bye, too.

In the real unregulated marketplace, shareholders who profit from investing in a monopoly, share in the losses as well. Businesses that make mistakes and fail are replaced by other, innovative firms. Life and services go on. But the government has been involved in this particular business for too long and is now doing the negotiating on deregulation. Consumer relief will not be as great as it could be, and it will not come cheap.

Facing the threat of taxpayer-funded court battles, we ratepayers will probably give in, take a bath and wait for that phone call asking us to which company we want to pay our share of the stranded cost extortion. But we must also pay attention, because this issue isn't just about electricity, but about power in general and none of us wants to be left behind in the dark.

Barbara Anderson is co-director of Citizens for Limited Taxation and Government. Her bi-weekly column is syndicated and appears in the (Quincy) Patriot Ledger, (Salem) Evening News, (Attleboro) Sun-Chronicle, (Worcester) Telegram-Gazette and others.