Power deregulation will shock customers & workers

Power deregulation will shock customers & workers
May/June 1997

If you liked the Savings and Loan bailout, you'll love power deregulation. Several states, including California and New Hampshire, have already thrown the field open to this new form of privatization, and the federal government is considering passing legislation to speed up the process.

Florida will likely consider such legislation soon. What does it mean? It means that private corporations will be free to compete with our municipal and public utilities and rural electric cooperatives. It will mean that workers in the public utilities will be laid off or have their wages slashed due to "competition," it'll likely mean residential power rates will go up, and it'll mean a huge bailout--some estimate $135 billion, from taxpayers to public utilities and private corporations.

If you don't believe it, check this out. California taxpayers have already been contracted by their legislature to pay $28.5 to bail out the utility industry of the state as part of its deregulation plan, according to the Labor Party Press (May 1997). Union workers in California are already experiencing layoffs as utility companies sell off power generators, a requirement of the law. This plan passed with no dissenting votes by either Democrats or Republicans.

Private utilities win out
Investor-owned utilities and city owned utilities already get the most federal subsidies, which amount to between $60 and 80 dollars per customer per year. Rural electric cooperatives receive only $20 per customer per year, yet they are criticized for getting subsidies. According to the head of the National Rural Electric Cooperative Association, "The nation's investor-owned (private) utility companies owe you--the American taxpayers--more than 74 billion dollars. As Congress works hard to look for ways to balance the federal budget and reduce the tax burden it places on the millions upon millions of hardworking Americans, it's time they examine what the General Accounting Office says are "interest free loans" made to these huge for profit corporations."

According to Clay Electric Cooperative's General Manager Bill Phillips, rural electric cooperatives have to pay interest on their federal loans, whereas the for profits get interest free loans. "But the government had to borrow money--$5 billion a year plus interest to make up the difference. That adds to your tax bill."

Non profit rural electric cooperatives were instituted so that power users could afford to get power. Clay Electric Cooperative, Seminole Electric Cooperative and other rural cooperatives deliver power to much of north Florida. Municipal utilities such as Gainesville Regional Utilities provide power (and other utilities) to city customers and the profits go largely into the City's general budget.

We'll pay more
Deregulation and competition will make our power costs go up. Here's why: It is expensive to deliver power to individual residential customers and other small users. Delivering electricity to residences in the rural South, for example, isn't lucrative. That's the reason most of the rural south didn't have electricity until the Great Society programs of the 1930's built hydroelectric dams, generating plants and power lines to provide rural electricity at a rate people could afford. Competition, deregulation and market capitalism didn't bring us electricity, a huge public (government) program did.

It is cheap to provide electricity to large power users, such as manufacturing plants or the University of Florida, because they use so much compared to what it costs to deliver it. But because utility companies now charge standard rates, the income from big users helps the utility, and small users get relatively lower rates as a result.

What deregulation means is that a company, say Megacorp, USA, can buy bundles of power from a power generator (or buy the generator) and offer lower rates to the big users who will snap the deal up. Meanwhile, GRU and other publicly owned or user owned utilities will lose those big accounts and guess who--you, the smaller customer--will have to pick up the tab for the increased costs. Or, because of competition, our existing utilities will have to offer big users big deals, driving up the cost of residential and small business power provision.

We in Gainesville have an example of this with the University of Florida. UF gets its power (a better deal) from Florida Power and Light, a private for-profit company. If UF bought power from GRU, GRU would bring in more money per kilowatt, and the ratepayers in the city would either pay less or the City would have more money in its coffers for City projects. But UF gives that money to a private company and no-one benefits but the stockholders of Florida Power and Light and UF. (No, they don't pass those savings on to you, they pass them on in higher administrative salaries.)

Meanwhile, rural and residential customers will not be served by the for-profit corporations because we're too expensive. Public power is public because, just like busses, roads, sewers, parks, schools, not much money can be made off of the majority of the service. They never privatize the whole thing, just the lucrative part. Thus medicine is for-profit except for those who can't afford it, who must rely on the underfunded, overburdened public health system. And power will rake in the profits where it can, and let residential and rural customers make up the difference in their higher rates.

"An essential service like electricity can't be completely left to the whims of the marketplace," says Dennis Yocum, executive VP of the Florida Electric Cooperatives Association. "Whatever happens in Washington, D.C., let's make sure that more Americans don't end up paying too much so that a chosen few can pay less."

GRU and competition
In a letter to the Gainesville Sun on May 17, Marilyn Bates levelled criticism at the supposedly non-profit GRU for putting profits into the City's coffers rather than lowering utility rates. She stated that property owners, rather than ratepayers, should be taxed for city services, implying that the extra dollars on our utility bills really is a regressive tax. But then she wrote, "I wonder how much cheaper our utilities would be if they had competition." While no watcher of GRU would accuse them of lowering rate or encouraging conservation, competition is an unlikely cure.

But it is based on this common misconception that the big power corporations are selling deregulation to the public. The assumption that free market competition and deregulation makes things cheaper, more efficient or better is not borne out by our experience over the last few years. Deregulating the S&L's made a few people rich and the public hundreds of billions poorer. Medicine, an essential market-driven service, has experienced the steepest rises in costs of any industry. Cable deregulation has led to rising costs. Natural gas deregulation helped big gas buyers and businesses who are reselling, but not the small user. The deregulation of media ownership has led to a frightening concentration of power in the hands of a few large corporations, and the big media have used their resulting power to pressure Congress to enact a huge giveaway of the public's airwaves.

We're still waiting for phone rates to go down, and while the phone bill may be confusing, we know contained in there somewhere we're paying for huge ad campaigns. In New Hampshire, a trial program allowed 17,000 customers to pick their own power. According to the Newark Star-Ledger (April 27, 1997) 30 marketing firms flooded the state "With legions of telemarketers, mass mailings and expensive advertising campaigns."

Contrary to the standard media line, regulations are a way for the public to have a say in what businesses do to us, restraining the worst abuses and injecting some of what is good for the public into the otherwise strictly money-hungry plans of corporate capital. Still, businesses work hard to spread the myth that regulations and price caps make consumers pay more. In reality, they cut into corporate profits and in general make things safer, cheaper, more accessible to more people. (Of course some regulations are encouraged by big business to get rid of smaller competitors.)

Cheapness and efficiency are not hallmarks of private corporations, unless by efficiency you mean paying workers less and cutting their benefits. This is because private companies have to maximize their profits (charge you as much as possible) to pay their owners or stockholders. In contrast, electric coops and credit unions divide profits among all their customers and pay you back at the end of the year. And for all of GRU's faults, at least the money ends up in the City's treasury, where the public has some say in how it's spent. Additionally, executives are paid less in public companies, and public companies pay their rank and file workers better, which helps raise wages for everyone in the area.

Your tax dollars at work
Using tax dollars, the government and semi-public or user-owned utilities have taken on the main expense of building the power infrastructure: lines, poles, substations and transformers. While in the past corporations have been held back by regulations stipulating regional monopolies, if privatization goes through, any company will be able to use the existing power grid--which citizens and ratepayers own, in many cases--to sell us power. And if Florida follows California's model, the public utilities that are owners or part owners of power generators (such as Deerhaven) will be required to sell those to private companies.

Instead of deregulating and privatizing, why not make the whole thing public? The Labor Party Press quotes Carl Wood, national representative of the Utility Workers of America, "There continues to be public ownership of electric utilities in some states. They often produce energy much more cheaply, their executive compensation is much lower, and they're decent places to work. This is an industry that cries out for public ownership."

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