Big utilities are sweating about hearings that federal lawmakers are holding around the country. The subject: how to write a new law to restructure the electric power industry.
I’m sweating too. If Congress does this wrong, it could mean the end of my small business and thousands like it all over the nation.
The House Commerce Committee, which has jurisdiction over utility issues, is asking Americans what they think about bringing competition to the electric power industry. On the surface, it sounds like a good idea. Competition should mean greater choice and lower prices for all electricity consumers.
Ironically, more competition among giant electric companies may mean a lot less competition in related consumer services. Call it the law of unintended consequences, but this great utility “shakeout” may reduce consumer choice and bring on much higher prices for electrical products and services now delivered to homes and businesses by independent contractors.
The reason is simple. For most of this century, electric companies have lived as “natural monopolies.” In exchange for state-regulated rates, each had exclusive rights to sell electricity to all customers in its service area. Their profits may have been a little lower than other industries from year to year, but those profits were guaranteed.
An insidious tactic that harms consumer interests is the hidden subsidies and bookkeeping gimmicks some utilities use to get into the electrical services business and compete unfairly with small, independent contractors. They use the guaranteed profits that are still rolling in from their guaranteed rate base to start up subsidiary service companies, home and business security agencies and other enterprises.
The most flagrant example is the ultra-cheap, annual service and maintenance contracts that electric companies offer directly to homeowners. No doubt you’ve seen ads for them in your monthly electric bills. There is no way the utility can make money providing this kind of service for as low as $49, which is all some utilities charge.
Utilities can offer such deals because they subsidize the loss with revenue from other parts of their business–something a small company can’t afford to do. I call that unfair. If the subsidy comes from the rate base, it’s flat-out illegal. Either way, the consumer ends up paying for it.
Now, I’m all for competition. After all, I’ve thrived in the competitive world of small business. But I oppose unfair competition that would let the last remaining legal monopolies muscle me and others like me out of the way so they can avoid the healthy changes that restructuring is designed to impose on them.
Some states, like New York, have recognized the problem and taken steps to prohibit utilities from illegally subsidizing other businesses. But unfair competition from utilities is happening all over America. It would be naive to count on 50 states enacting 50 separate consumer-protection laws, especially in the face of big utilities spending millions of dollars on lobbying.
When Congress writes the federal law, it needs to ban unfair utility competition.
