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Utilities don’t want consumer choice

August 30, 2013

Nick Dranias was correct when he opined in the August 26 Arizona Republic that “Utilities don’t want consumer choice.” And why should they? Why would any company give up guaranteed profits and guaranteed future growth? But, on the other hand, why should Arizona electric consumers be denied the choices and lower prices that a competitive market would bring? Electric utilities in Arizona made a big mistake when they went along with allowing the Arizona Corporation Commission (ACC) to effectively manage part of the utilities operations by mandating a portion of the generation source that they must use (the Renewable Energy Standards). Now utilities realize that the portion of their customers who produce their own solar will bankrupt the utilities because these customers do not pay the full cost of their demands on the electrical system. APS and some others are trying to get the ACC to change the rates for these customers (rates known as “net metering”).

A much better idea, as suggested by Nick Dranias, is to simply end the monopoly and let the utilities compete. Government guaranteed monopolies simply do not make economic sense. They do make political sense because, like any regulated industries, the regulations allow those with political power to get cheaper rates at the expense of those with less political power. But all consumers pay more because monopolies are never as efficient as a free market company and they stifle innovation which prevents consumers from receiving the benefits of changes in rapidly evolving technologies.

Some will argue that these monopoly regulations once made sense but today’s rapidly changing technology makes them less viable. Actually, such regulations never made any economic sense (even though they might have made political sense as I previously outlined). These regulations were supported by the regulated utilities with the argument that they wanted to protect consumers but the real reason for these regulations and for most government regulations is to protect the regulated entity from competition.

Finally, there is one truth that has become obvious to me as I attend meeting after meeting where arcane economic theories and incredibly complex new technologies are explained. That truth is that there is simply no fair way for some government bureaucrat to determine what any consumer should fairly pay for any given amount of electricity. That determination can come only from the interactions in a freely competitive market. Let’s get there as soon as we can.

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