June 1, 2001 (Ira Pilgrim)

The Utilities Market

It is always sound business to take any obtainable net gain, at any cost and at any risk to the rest of the community.

Thorstein Veblen (1857-1929)

Many people believe that the law of supply and demand is what regulates the price of almost everything in a "market economy." What has happened to the prices of energy sources such as gasoline, fuel oils and electricity calls that assumption into question.

The so-called market economy, and the predictability of the law of supply and demand, depends on the managers of large corporations behaving like traditional capitalists rather than speculators. Speculators operate on the "take the money and run" principle. Capitalists provide a product or a service, and they make money by selling a lot of it. The people who head the major energy companies are probably Monopoly players since their childhood.

Suppose that the producers of electricity realized, as they must have, that there is a constantly increasing demand for electricity. Rational capitalist behavior would dictate that they would build more and more power plants and sell more and more electricity. As a result, they would make lots of money for themselves and their stockholders. That is not what they have been doing. They have done the exact opposite.

Power plants cost lots of money to build. Why bother building power plants when you can make just as much money, or more, by simply raising prices? If there is no competition, there is nothing to stop them from doing just that. Then, in the face of acute shortages, you can get the government to build the power plants for them. Not only that, but the feds would subsidize the building of nuclear power plants, with much of the cost of construction, and all of the cost of waste disposal. Atomic power is the most expensive form of electricity production if you factor in the disposal of radioactive waste. The government has picked up the tab for most of the cost of nuclear power. Where do they get the money? From you and me.

The power companies can get away with it because there is no real competition. By competition I mean other companies, that are willing to sell power for less. Public utilities are monopolies because they have little or no competition.

I thought that something was funny, many years ago, when power companies were trying to convince consumers to use less power. That's like farmers trying to convince people to eat less, or Sears trying to convince people to make do with their old refrigerators, dryers and dishwashers. That is what you might expect in a communist economy, not a capitalist one.

The power companies are now raising prices to obscene levels, increasing profits many times, and blaming the consumer for the problem. If people didn't use so much electricity, prices wouldn't go up. Baloney!!

In support of that take-the-money-and-run philosophy, they have bought the politicians, including the president and, using TV commercials, are trying to buy the public.

It is an old adage(at least 30 years old) that the California Public Utilities Commission(PUC) was in the pocket of P.G. and E.(Pacific Gas and Electric). This hasn't changed, as indicated by the PUC authorizing obscenely large raises in prices of electricity.

The prices of other energy commodities, natural gas, propane, gasoline, diesel have all gone through the roof. This happened despite there being little or no real shortages. However, there is also no competition. The major oil companies, over many years, have systematically eliminated the competition. The independent gas station and the independent gasoline supplier are almost gone. The town of Laytonville used to have four gas stations. Now there is just one. Between the major oil companies and the so-called anti pollution laws passed and enforced the State of California, the small independents have been scuttled.

What can the consumer do about it? Not much. I do not use P.G. & E., nor natural gas. But I am still stuck with high gasoline and propane prices. My only defense is not to go anywhere and to use wood for heating.

And how about the venerable law of supply and demand? That law is broken as frequently as any other man-made law.

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