Dwight Watt Internet Article #64

#64 - Deregulation and re-regulation 3/31/2001

#64 - Deregulation and re-regulation

During recent years the states and federal government have deregulated many industries The airline deregulation and telephone deregulation were both successful, although there have been some minor problems. In both cases rates are much lower now than before deregulation. The rage the last few years has been to deregulate the rest of the utilities, specifically natural gas and electricity. This has run into very rocky ground the past few months.

We have watched California suffering rolling black-outs the past few months and deregulation has received much blame. In Georgia the natural gas utility was deregulated a year ago and we have experience various problems including billing problems and huge increases in prices. Is deregulation the problem, and if so is re-regulation the solution?

The California situation appears to be that once deregulation occurred, the electric utilities became only concerned with marketing the electricity as cheap as possible , and no thoughts to where this growth in electric consumption would come from and no money or plans for construction of new plants. Electric plants are not built overnight, so it took several years for the problem to appear. To use a common saying, they ate their seed corn. Now they don't want to raise rates to pay for plants and they also don't want to pay high rates for buying electricity and importing it.

The Georgia situation has been a different one. First the marketers apparently in many cases never did their homework and planned their billing systems. There are many out there complaining that they have not received a bill for 6 months or more and calling and requesting one does not help. However the companies are pleading their running low on money. They need to learn (1) customer service, (2) how to bill and (3) cash flow management. A second problem has been that gas prices have gone thru the roof this winter. This has been blamed on deregulation. However whether your gas service was regulated or not, the prices went sky high all over the country.

Should we continue to deregulate the natural gas and electric utilities? I think each state should proceed very cautiously on this. First these utilities are not as easily open to competition as other companies. If I go to the Atlanta airport a number of airlines can fly in there. However as a residential consumer only one electric company is going to run wires up my street. (Large industrial users have had competition for years in Georgia as both Georgia Power and the EMC would be willing top run wires to them.) Likewise the gas is coming from one provider who runs the pipes but in deregulation it is different marketers, not a real open market like gasoline and groceries. Secondly, the states will need to determine how to get the companies to continue to massive investments in plans and lines when no guarantee they can recover the money.

Should we re-regulate the utilities we have deregulated. No. I think we should look though at putting some increased oversight on them and consider re-imposing regulation if abuses continue. For those companies in Georgia that cannot seem to be able to bill, they should be given a certain amount of time (60 days?) to get bills out in and if not forced to eat that bill. If we don't pay in timely fashion they disconnect us. Financial incentives work wonders. Comparison publication of gas rates and electric rates in newspapers in the areas where deregulated would be consumer helpful, such as some papers do on gasoline prices.

We should continue to look to deregulate the utilities, but keeping in mind that these are unique industries. This problem may or may not affect you yet, but it will soon. I am still on a monopoly municiple utility (Gas, water, electricity) in Elberton, and on regulated electricity (EMC) and propane gas (deregulated and wild price swings). However Elberton expects the competition in gas soon. Push to encourage your state to continue to encourage capital investment in your utility supply.


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Copyright 2001.