It’s Good for the Consumer, NOT!
April 26th, 2006 | by Paul Merda |For years our Conservative brethern have claimed that deregulation of utilites was “good for the consumer.” Well, the evidence is pointing in another direction. Deregulation is good for the Utility Companies! That’s right, in areas where electricity has been deregulated, some people are seeing 100 percent increases while the areas where electricity is still regulated, the rates have stayed fairly flat. How can this be? I thought competition was suppossed to reduce rates? I thought the “Free Market” was the answer to all of society’s economic woes? The major problem right now seems to be that there really isn’t a free market for consumers in these deregulated areas. In Ohio, a deregulated state, I have only access to one, that’s right, one electric company. How am I suppossed to get the best price when there is only one game in town that seemingly can charge whatever they want? Good for the consumer, my ass!
6 Responses to “It’s Good for the Consumer, NOT!”
By CSC5502D on Apr 26, 2006 | Reply
Hey Brainiac,
In the states where there is “regulation” (meaning government run or controlled), how many choices are there? Oh, that’s right…ONE. Just like anywhere the cable company has a city franchise, there is only one cable choice. At least if the area is open to competition, somebody CAN compete. In regulated areas, nobody can, and it sucks worse. Example?
Riverside, CA : City run electricity, water, sewer, trash and city issued cable franchises. Result? ONE choice for all of those things, and to pay the bills or transact any business you have to go downtown to their ONE office.
Yeah, that’s so much better.
By The Cranky Brit on Apr 26, 2006 | Reply
If nobody competes, then there is no market. Same as in the regulated states. But in the regulated states, the people can kick out the people in charge. Can you do that in a deregulated state with just one provider? I know you can’t, as we have the same situation in the UK with some of our utilities.
By LiberPaul on Apr 26, 2006 | Reply
Sorry CS, but the fact remains, people in regulated States are generally paying less than those in de-regulated states. If there were true competition, I am fairly sure we might be better off in a de-regulated environment, but we aren’t there…..yet.
By Tom Harper on Apr 26, 2006 | Reply
Pacific Gas & Electric (PG&E) in California has sure made out like a bandit with deregulation. They’re the only game in town and they get away with anything they want. A few years ago, they received a huge fine for failing to trim trees near their power lines. The fine was suspended, and almost immediately PG&E requested a humongous rate increase. They said they’d have to do massive layoffs if they didn’t get their rate increase. They got their increase, and they’ve still had tons of layoffs.
Where I live now, the utilities are provided by the city, and it’s a much better deal.
By ken grandlund on Apr 26, 2006 | Reply
Utilities like water, electricity and trash are necessities of life. like it or not. In California, when deregulation came to pass around 2000, we witnessed the wonders that it brought to consumers via Enron. Market manipulation, rolling black-outs, higher rates for consumers, and the like. Sometimes, things do need to be regulated, especially when those things are necessary to manage day to day life or are things mandated by law.
Cable is a slightly different story, but even unregulated cable has few benefits to a consumer, since you still likely only have one cable provider in an area. Sure, you could put up an antenna or buy satellite tv service, but your options are still few, and often similarly priced anyhow.
Deregulation in theory can bring in more competition, but seldom does that happen, especially with products needing a huge amount of infrastructure to deliver. Simply opening the door to competition does not make it possible for competition to spring up. Power Company A (the monopolist on power creation, distribution, and service under regulation) isn’t under threat from a new power company just because the industry gets deregulated. They still control the lines that power is sent through. Same with water pipes, sewage receptacles, and other infrastructure heavy industries. And often, if told to divest of some parts of the infrastructure, they sell off to a shell company of the parent company and still keep the bulk of the cash.
Regulation of some sectors of the economy is a good thing. After all, how many people are going to buy your newest widget if all of their disposable income is sucked away after deregulation of the power industry causes prices to go up? And increased pricing is usually the end result of a deregulated product, along with poorer service and less quality as companies lose track of their initial goal- providing a necessity to the public they serve. Under deregulation, their focus all becomes about increasing profit and limiting competition- seems as if deregulation (in energy, water, trash, sewer at least) is just another buzzword for “screw the consumer.”
By LiberPaul on Apr 27, 2006 | Reply
Hear Hear Ken!