Adding Insult to Injury
When GWB and other “free market” politicians were pushing deregulation of power markets back in the 1990s, “competition” and “low prices” were the most used words by them and other propagandists to get the bill passed and overcome the fears of consumers at the change. Two decades later, those lies have been exposed for what they are, lies. I’ve suspected it for years, but have never really dug into the numbers to prove it. That liberal rag, The Wall Street Journal, did that digging for us, and published the results. AND, those results will piss you off like it did me. I hope you’re sitting down – Since 2004, Texas power consumers forced to buy from retailers have overpaid by $28 BILLION than if we had just stayed regulated.
That’s right; not only did we hand our power grid over to unregulated operators that has led to several major power outages including the one last week where the body count is now 80, we’ve paid extra for the privilege.
Republicans Libertarians have two answers to every problem: cut taxes, and privatize. As we’ve talked about before, when you only have a hammer in your tool box, every problem looks like a nail. As we’ve learned with many other services, including health insurance, prisons and military functions, privatizing costs more, provides worse service, and endangers lives when you insert profits into the equation. We were infected with the disease of privatizing by Reagan when he blamed government for all ills. He is the one who kicked off the now 4 decades long disassembly of our social safety nets putting millions of Americans at risk and costing hundreds of billions of our dollars.
Even with calls for reform and Abbott’s hostage video last night, the propaganda of “free markets” has been embedded in conservatives’ Libertarians’ DNA and I fear that the misinformation is so pervasive that even this failure will be swept under the rug like all the others and the “reform” will be a little nibbling around the edges keeping the profits in place and keeping Texans’ wellbeing at risk as politicians kick the can down the road. After all, these are the clowns who say it’s OK for a gun nut to shop at Kroger for this weekly supply of Twinkies with an AR-15 strapped to his chest. How can we expect them to actually fix a system whose beneficiaries pours millions of dollars into the campaign coffers of those who protect them?
Is it possible to show that utilities still make a profit while regulated?
Then the only reason to deregulate is to force consumers to pay more, which runs opposite of the classic argument that prices are held lower under capitalism…
1@ Old Fart – What suffers here is maintenance and reliability. In regulated power regimes, rates are determined by costs paid by the operator to maintain their facilities with a regulated margin added in. There are penalties if the operator does not meet its capacity requirements. In our system, operators are not obligated to generate power, reliability requirements are voluntary, and their are no penalties for failure.
2I have found that contracted out services rarely do as well as government workers providing the services. One that bugs me are the highway contractors who are supposed to mow and maintain the highways. I can’t tell you the number of windshields I’ve replaced and how many times I’ve had to ease around flooded areas, all because state contractors don’t clean up the junk on highways or the weep holes on bridges.
3In the linked video, even the Democrat referenced ‘the storm’ as the culprit.
No. The storm was not the problem. Cities north of Houston had colder temperatures and more snow and they came through just fine. It was Republican **ahem** Libertarian policies that caused the devastation. It was private money flowing into the coffers of candidates for public office.
All of this mess and many others could be taken care of in a heartbeat if we could convince members of the SCOTUS that no, corporations are not people and money is not speech. iow, we’re screwed.
4On the good news front, President Biden is bringing on Wahleah Johns as head of the Office of Indian Energy. While her focus will be strategies for energy independence for thousands of Indigenous communities. There’s a lot she can teach all of us in addition to the Indigenous communities.
Energy independence means way more than simply ending reliance on foreign oil. It can be freedom from the profiteers, too. Green New Energy, and we don’t have to sell Rexxon Drillerson and others a piece of the sun to achieve it.
5There is another alternative to regulation — public ownership.
It generally works well.
6Libertarians have two answers to every problem: cut taxes, and privatize.
Actually they also insist on deregulation and eliminating all laws possible.
@Old Fart @ 1 — if you really are old enough you will remember a time when almost all utilities in the US were heavily regulated and they made a profit. I did consulting for CP&L (North Carolina) for a while and my firm charged them outrageous fees for what we were doing. They still turned in a profit each year because the PUC would approve rate hikes based on their expenses, of which I was one.
The thing about “free market” and “competition” that libertarians will never get right is that when there is a profit to be made, corporations will always trade off long term interests to make that short-term profit. In other words, don’t do maintenance because that maintenance costs money and makes you charge higher rates which your competitors ARE NOT doing because they don’t “have” to. So you are not competitive unless you cut corners.
Libertarianism is an adolescent fantasy that is no more applicable to real life than Harry Potter fantasies are.
7@El Jefe #2 & @Alan #7:
Thanks for your responses. As a resident outside of Beantown, I have been *incredibly* fortunate to have had the degree of uninterrupted electric and water services^ I’ve received over the past 3 decades. I can’t say enough in thanks to the workers that have to go out in the most terrible weather, except to state they earned their money so I am going to pay what they’re worth. I don’t want to pay more, as the victims getting obscene bills from their “low cost” providers will be forced to…
^ We had a 24″ water main blowout with a ~50′ long by ~10′ wide by ~10′ deep trough suddenly appearing down the middle of one of the nearby “sub-main drags” over the course of under an hour it took to stop the water. Electricity and water are requirements that modern life cannot do without, and are disastrously dangerous when ill maintained.
8I always thought a revision of Reagan’s statement should be uttered by progressives to bring home the point.
“In the coming battle, corporations are not the solution to the problem. Corporations are the problem.”
It comes down to the difference between public goods and private goods. Public goods are those things which are either more efficiently regulated by the government or are repugnant for private actors to excessively profit from (or both). A private good is one that is not necessary for survival, so private companies can profit all they want. I don’t need excessive regulation of the television set industry or cell phone industry.
However, other industries become way too problematic when I insert profit motive. For instance, could you imagine public education if it were run privately and for profit? Some students wouldn’t receive services because it would be deemed too costly. That or parents would be expected to pay for those services out of oocket.
Profit motive makes sense for a lot of things, but it is not a universal. No ism is universal.
9I’m sorry, Texas. Maybe voters can use the fact that they’ve been ripped off from the get-go, and especially now, to turn Texas blue, next election. A Democratic Texas might do well to consider un-privatizing the state’s electrical grid, since Republicans simply won’t.
10Nick, in economics I am a follower of Rexford Tugwell. He is not popular among academic economists these days but what he said in the ’20s matches very well with what is happening now.
Alan @ 7 Everywhere I worked, regulated utilities not only made profits but were almost guaranteed profits. That’s why utility bonds were in widows-and-orphans portfolios.
In Virginia, for example, a percentage return on investment was but into rates beforehand. The manager then had to be competent enough to hit those targets, but if he was very good he could get a little more.
To prevent managers from skimping on maintenance there were penalties built in for missing reliability targets.
Hawaii was, functionally, like Texas — isolated so it could not borrow from other systems in times of constraint. The rule was that the system had to maintain excess capacity equal to its 2 biggest generating units. So that if one was offline for maintenance and another failed, the system could still produce adequate watts.
That heed keep electricity rates high but in the long run it saved money.
For Texas that would mean paying for excess capacity of about 5 gigawatts which would be very expensive (although nowhere near as expensive as what Texas has got now).
Interconnection is the closest thing to free lunch.
(I was astonished to learn that Texas gets some of its electricity from lignite. They really ought to stop that.)
11Yeah, WaPo has shown that our deregulated system *is* more expensive, but hey, it keeps money coming into Big Oil and Gas. They appear to need that b/c 1 of the Libtard papers (either WaPo or NYT) did an article sometime since I got locked down that said they’ve been losing money for years and are drifting down in the stock market. So we need deregulation in Texas to keep the fat cats’ milk bowls full.
12Privatization is essential in preventing ratepayer funds from being wasted on system maintenance and improvements. Those funds can instead be directed toward a more useful purpose: CEO salaries, with a fraction spent on political donations to politicians favoring privatization, and those awarding contracts to the privatizers.
(/sarcasm).
The problem with privatization is that it’s difficult to unwind: the government would have to buy back the utility at market rates. About the only practical solution is to wait until the utility files bankruptcy…
13There are several energy providers in California but the biggies are Pacific Gas & Electric (PG&E) and Southern California Edison. I have the later. Both answer to federal and state regulations. Their profits are decoupled from quantity sold but we are subject to payment tiers based on usage. Rate hikes are controlled by the PUC. Even so, our rates are very high because we have the fox watching the hen house but it’s still better than zero regulation.
PG&E is in big trouble from lack of maintenance. A 30″ gas main blew up a neighborhood near the San Francisco International Airport in 2010 and there have been several major wildfires caused by their power lines. The city of Paradise was wiped off the map. Santa Rosa did only marginally better. As a result, they are being sued for billions and the state has made plans to take control if they go bankrupt. I wonder if the utilities in Texas can even be sued?
As for the Libertarians carrying assault rifles in Kroger stores, we get the same thing here. I’ve had guns since I was a kid for hunting and target shooting, but when I see these guys with an assault rifle in a Starbucks, I get pissed off. I can’t tell by looking at these yahoos if they’re a good guy with a gun or a psycho killer. And why would a “good guy” need to be armed just to get a cup of coffee. Either way, it’s just silly and unnecessary.
14djw @ 12 That the petro companies have been losing money is no lie. The fabled Eagar fortune is based on Exxon stock, which was for some time down by two-thirds from recent peaks. (Today it is down by about a third and the talk on the street is that it may cut its dividend, which would be a huge deal among us plutocrats.)
Natural gas stocks have done far worse. The biggest, Chesapeake, has lost its investors 99.9% of their capital and its founder drove his SUV into a bridge abutment rather than deal with prices.
People of a certain political persuasion may well be cheered by this implacable operation of the capital markets, and the financial performance might have been even worse except for overcharging through ERCOT, but the suffering in de awl bidness is fo’ real.
15When the only tool in the toolbox is a hammer, it isn’t a claw hammer. Itsa (sic) ballpeen hammer.
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