Once upon a time there were companies called utilities. They were big and boring, sluggish and inefficient. But they were, with few notable exceptions, reliable.
Utilities could be relied on to provide the consuming public with whatever it was they were supposed to deliver–electricity, natural gas, a dial tone–at a reasonable price. They could be relied on to provide investors with a respectable annual dividend–typically in the 5 to 7 percent range–while maintaining a stable price per-share.
There was a special compact that made utilities work. Utilities gave up the right to unilaterally raise prices. In return they were given monopoly franchises by the governments that regulated those prices. Consumers got dependability but gave up the ability to shop around. Investors got a safe return but gave up the prospect of a stock-price windfall.
It was dull businessand it worked until the ideologues came along and ruined it. They didn’t ruin it intentionally, mind you. Ideologues almost always mean well. They tend, however, to get carried away with the intellectual flavor-of-the-season, often pushing their beliefs to ruinous extremes.
The assault on utilities coincided, roughly, with the frenzy of American self-satisfaction surrounding the fall of Soviet communism. During the ’80s and into the ’90s, state socialism was exposed for the Big Lie it surely was. American-brand corporate capitalism, on the other hand, thrived as never before, driven by free trade, unfettered markets and the inexorable logic of its one, universal commandment: Maximize shareholder value.
There was no place in this new order, of course, for old-fashioned utilities.
Not with their quaint legal concepts of “public convenience and necessity” and “reasonable rate of return.” Reasonable? The only reasonable rate, for true believers, is whatever the market will bear.
So began the great dismantling of the public trust known as the utility.
A federal judge ordered the breakup of AT&T. Other long-distance carriers blossomed, as did a variety of telecommunications gadgetry. The ideologues credited deregulation, not advances in electronics engineering, and barely noticed that, for the non-digital, basic-monthly-service majority, quality kept going down and prices kept going up.
Airline deregulation followed, leading to cutthroat price competition on the most popular interurban routes, abandonment of smaller markets, cattle-car conditions in the sky and the degeneration of major hub airports into campsites for the aero-stranded.
But the most painful effects of deregulation are only now becoming manifest, what with the electricity crisis in California and the natural gas shakedown here in the Upper Midwest.
California lawmakers deregulated electricity in 1998, having been convinced by ideologues and opportunists that utilities shouldn’t produce their own juice, but buy it on an open market. So utility giants like Pacific Gas & Electric spun off their generating plants and became mere conduits of free-market electricity. It didn’t take long, though, for the new breed of profit-minded producers, many owned by the same investors who own PG&E, to bid up the price to the point where PG&E is on the verge of bankruptcy.
The ideologues, of course, have a free-market solution: Let the utilities pass on to consumers the full market price. Some solution. Though it is better than one recently offered by the believers who write editorials for The Wall Street Journal’s editorial page. They’re calling for a rollback of California’s air-pollution laws so as to spur construction of coal-burning plants. Gasp.
Closer to home–indeed, down in our basements–Chicagoans this winter are getting a full dose of deregulation.
Natural gas was deregulated nationwide during the ’80s. This was good for some regions of the country. But guess whose regions’ utilities then controlled vast supplies of price-capped “old” gas. And guess which consumers lost their claim on that gas when deregulation broke up the old vertical “wellhead-to-stove-top” utilities. Now our utilities buy much of their gas from investor-owned storage and pipeline companies that formerly were their affiliates.
Sooner or later, this winter’s gas-price spike will go away. Why, some day, simple homeowners may be able to buy their gas wholesale.
Maybe then we’ll get what the ideologues call the full benefit of deregulation.
But right now we’re more likely to get our first four-figure gas bills.
