Overcharge How We'Re Wired By The Utilities

...Munson identifies two major strategies for the future...

...People caught in such a position understandably would prefer to believe that somehow, someday, the dire shortage will come and that once ungrateful customers will suddenly recognize them for having been lonely prophets without honor...

...For example, a single technological breakthrough in photovoltaic cells, which convert sunlight directly to electricity, could allow customers to bypass utilities entirely for most, if not all, of their power needs...

...At that time, the industry was characterized by the kind of entrepreneurial spirit that would send a George Gilder into raptures...

...For decades, Munson writes, the electric utility industry was considered the dumping ground for mediocre executives, “who traditionally came from the bottom third of their engineering class and were protected from competition by regulatory bureaucracies I’ These executives were scorned by others in the private sector, who saw them as “unimaginative laggards,” incapable of hacking it anywhere else...

...And even if electricity demand does continue to rise, the industry has a second, even more terrifying, nightmare: a dramatic change in how consumers get their power...

...The danger posed by these icebergs is reflected in some different numbers...

...In retrospect, it appears the industry was setting a trap for itself that would spring shut during the 1970s with the utilities’ headlong rush into nuclear power...

...Consolidated Edison might soon go the way of the iceman in the age of the refrigerator...

...If a private producer should go bankruptan occupational hazard in any deregulated market-consumers need assurance of minimum disruptions in service...

...Within a month of his inauguration, Roosevelt made good on his promise to create a Tennessee Valley Authority...

...Rodale Pmss, $16.95, more efficiently generated and thus cheaper, he would submit to public regulation...

...Through marketing surveys, Vennard learned that “government-owned” had a far more sinister ring than “public utility,” and that “investor-owned” sounded a great deal more attractive than “private power...

...As an example of the potential, Munson points to California, where “energy entrepreneurs” sell power to the state’s utilities, using cogeneration (a process that uses fossil fuels to produce both heat and electricity...

...That’s almost two new Dlants a month, at a total cost Phillip Keisling is a contributing editor of The Washington Monthly...

...Meanwhile, the nation’s windmill operators, solar energy lobbyists, cogeneration enthusiasts, and others urge economic deregulation, using the arguments of Adam Smith...

...PURPA should be expanded to require public projects, such as the TVA, to purchase independently produced power...

...It’s unpleasant enough having to explain to irate ratepayers that, yes, rates are going up, and yes, it’s largely to pay for an abandoned nuclear plant that will never produce a watt of power...

...The bailout, which came in the form of making the Long Island Light Company eligible for governmentsubsidized industrial development bonds, will cost the US...

...And while the industry promoted the “all-electric home” as the ultimate symbol of modern living, utility executives busied themselves with plans for the small army of new plants necessary to meet the demand they were helping to fuel...

...Engineering and safety problems led to unexpected delays, interest rates rose, and utilities became the target of critics who wanted to halt the building of new plants...

...While two OPEC price shocks clearly damaged our economy, they did not destroy it...

...Modern microchip computers are an excellent example...

...of $1.8 trillion...

...The result, however, was not efficiency, but waste and high prices...

...Experience in the recently deregulated telephone and airline industries illustrates this latter problem...

...OVERCHARGE HOW WE’RE WIRED BY THE UTILITIES by Philip Keisling he nation’s electric utility companies are Tt he great icebergs of the American economy...

...The Reagan administration has not taken a clear stand on this question, doubtless realizing that further deregulation might well seal the fate of the moribund nuclear power industry...

...Treasury about $500 million through 1989...

...If state regulators could require these utilities to “wheel” (transmit and distribute) other utilities’ power, customers in high-rate areas could buy cheaper power from areas that happen to have surpluses...

...In one of the most spectacular failures in the history of American capitalism, Insull’s great edifice collapsed during the Depression...

...The first is familiar: greater reliance on “alternative technology...

...This is despite the industry’s abandonment, since 1973, of more than 150 unfinished nuclear- and coalpowered plants...

...Richard Munson...

...Annually, the utilities spend four times more on new equipment than all U.S...

...The distractions provided by World War I1 and the Cold War helped its cause, as did such obscure figures as George Vennard, an engineer-turned-advertising director for the electric utility industry...

...There’s nothing new here, though Munson does understand that not all alternative technologies make economic sense...

...Large public power projects meant cheaper electricity: the TVA’s rate was half that of private utilities in the region...

...One of the main characters in that saga was Samuel Insull, a onetime assistant to Thomas Edison, who began building a utility empire in Chicago in 1892...

...To his credit, Munson does not dwell on the oft-told tale of the nuclear industry’s woes, nor does he think the obvious lesson is a return to public power...

...And as rates increased, demand decreased...

...As for the electricity-equalsprogress equation, less of the former often means more of the latter...

...If electricity demand is volatile in an era of rising prices, Munson argues, it is far better to rely on conservation and large numbers of smaller generating facilities...

...small dams...

...Sure I used to think it wouldn’t do any harm to have the government run the electric business,” the man says, “but I’ve changed my mind...

...Such a lopsided use of the nation’s limited pool of investment capital might be palatable if the industry’s premise that more electricity use equals more progress were true...

...As its price rose tenfold, consumption plummeted...

...In a few years, Munson notes, such independent producers will provide 25 percent of the state’s electric capacity...

...and even the incineration of garbage...

...By promising to provide society with a basic commodity for a lot less money, further deregulation will free up billions in investment capital that can be channeled into such worthy causes as research and development, starting new businesses, and rebuilding our dilapidated infrastructure...

...Herbert Hoover embraced Insull’s model of private ownership and public regulation...

...There is also a danger, Munson notes, that the main beneficiaries of competition will be large, commercial customers, whose size gives them considerable clout in the marketplace...

...Private utilities should also be forced to relinquish their stranglehold on their portions of the nation’s power grid, which includes 600,000 miles of high-voltage transmission lines...

...He argues that the arrangement pioneered by Insull-a guaranteed market for a utility’s power in exchange for publicly regulated rates-no longer makes sense...

...solar energy...

...The industry has a long-term debt of $100 billion, on which annual interest payments, passed on to ratepayers, exceed $10 billion...

...FDR championed the public ownership of utilities as he had during his years as governor of New York, and he often attacked Insull as the epitome of capitalism run amok...

...Yet for utility executives who have based their multibilliondollar construction programs on the inviolate truth of such a curve, doubting its validity is a bit like asking an archbishop to question the existence of God...

...Because when government meddles too much in any business, you get socialism I’ Of course, it was not advertising that saved private utilities from nationalization...

...Hindsight, of course, is easy...

...Businessmen plying the Los Angeles-to-New York trade in both cases have fared far better than the Aunt Millies who want to visit their Sister Pearls in Dubuque or talk on the phone with their Cousin Selmas across town...

...One consequence of this colossal economic miscalculation is that monthly utility bills for the typical consumer have tripled since 1973...

...Responsibility for transmitting and distributing that power should remain in the hands of regulated utilities...

...The nation’s utilities are currently awash in excess power, having gone on a construction binge in the last two decades that has left them with 40 percent more capacity than needed to meet current demand...

...Munson’s second strategy is further deregulation of the electricity industry...

...And if the eventual goal was a unified, national power grid, it made sense to many that such a vast network be publicly regulated and publicly owned, much like the nation’s highway system...

...The private utility industry didn’t give up without a fight...

...He wrote ads accordingly...

...He also offers a sublime nugget of anthropological insight...

...Their vast, largely submerged bulk eludes the attention of the public...

...Now rates had to increase-a lot...

...If this suggests the wisdom of refraining from further construction, you’d never know it from the multimillion-dollar advertising campaign the utilities are now waging under the auspices of the Edison Electric Institute...

...Technological advances and economies of scale were conspiring to make electricity prices drop steadily...

...The book has the virtue of being more fair-minded than what some might expect from a former executive director of the Solar Lobby...

...The ubiquitous ads warn of devastating power shortages in the near future unless Americans face up to the challenge at hand...

...Many-especially executives of private utilities-saw the TVA as the beginning of the end for private power...

...The specialty steel and aluminum industries, for example, have discovered that investing in modern equipment that lowers electricity costs is one of the best strategies for survival in a competitive market...

...To encourage cheaper, more flexible alternatives to large generating plants, there should be more competition in the electricity marketplace...

...Experience and logic, however, suggest just the opposite...

...Public insulation Richard Munson’s The Power Makers* is a sober and thoughtful analysis of the troubled electricity business...

...Imagine what would happen if homeowners could purchase photovoltaic cells at their local Pay and Pak and install them on their roofs...

...Accordingly, many utility executives saw a multibilliondollar construction program as a chance to prove their prowess as true captains of industry...

...More rate shocks lie ahead...

...The machinations of Senator Alfonse D’Amato are even more revealing of a certain double standard on the right...

...There is also a sizable political op: portunity here waiting to be exploited, just as FDR did a half-century ago with public power...

...Munson instead attributes the industry’s plight to its inflexibility...

...He wisely notes that the nation’s most notorious nuclear debacle was caused by a public utility, the Washington Public Power Supply System, which has abandoned two plants, mothballed two more, and left behind $2.3 billion in defaulted bonds...

...It’s also something any Economics 101 student could have predicted...

...He also demonstrates that there are alternative technologies that make more economic sense than large nuclear power plants, which typically take ten years to complete and are difficult to abandon if circumstances suddenly change...

...What’s happening now with electricity is similar to what happened with oil...

...This helps explain the ads, which are nothing more than an effort in the age-old game of selffulfilling prophesy...

...For example, customers of the Public Service Company of New Hampshire, owners of the troubled Seabrook nuclear power plant, soon will see their bills leap 182 percent when the $4.5 billion plant is finally completed...

...This model became so successful that by the mid-l920s, Insull ruled an empire of utilities that stretched across the Midwest...

...For the first time in decades, adding new plants to the power grid did not cause rates to fall...

...There is nothing sacred in a perpetually climbing demand curve for any commodity...

...He urges that deregulation of the electric utilities industry proceed more gradually and that it be confined largely to producing power...

...Under a little-known law enacted during the Carter administration, the Public Utilities Regulatory Policies Act (PURPA), state regulators determine the price private utilities in California and elsewhere must pay for such power...

...windmills...

...California also allows independent producers to sell directly to large industrial customers, bypassing utilities entirely...

...California’s lead in letting independent producers sell directly to large customers should be followed on a national scale, he says...

...According to industry planners, that challenge demands the building of 438 large central generating stations in the next 15 years...

...A more puzzling reluctance can be found among those whom one might expect to embrace deregulation with open arms: conservatives...

...Consumers found countless ways to conserve, and the government put a healthy dent in oil consumption by mandating fuel-efficient automobiles...

...Here are Republicans, championing an industry that is “private” in name but whose club-footedness and inflexibility reminds one of Soviet agricultural commissars working on their next five-year plan...

...Munson’s style is not elegant, but that is a small complaint...

...With the utilities passing more and more costs to the consumer, demand declined further, forcing a new round of rate hikes...

...Insull’s lasting contribution to the industry was to propose a deal: in exchange for receiving a monopoly to provide electricity that would be *The Power Makerx The Inside Story of America’s Biggest Busines and Its Struggle to Control Tomorrow’s Electricity...

...What happened to the consumption of another key source of energy-oil-during the 1970s...

...After succeeding in making the bailout part of the Deficit Reduction Act of 1984, D’Amato denounced the overall bill for its “total lack of spending curtailment I’ The ironies are glaring...

...Most companies had their own generating stations, which seldom operated at full capacity and frequently offered different kinds of power...

...Munson urges even more deregulation...

...real economic growth during the 1970s still was greater than during the 1950s...

...automakers...

...The appropriate question is where the electric utility industry goes from here...

...D’Amato recently convinced his Senate colleagues to approve a government bailout for the embattled Shoreham nuclear power plant on Long Island...

...He also makes his account more interesting by devoting considerable space to a lively history of the electric utility industry that sheds light on how the industry reached the current crisis...

...The folding of his enterprise became a major issue in the 1932 presidential campaign...

...One that appeared in the Saturday Evening Post showed a proud father and his two children...

...As prices have spiraled upwards, consumers have moderated or even reduced their demand...

...Indeed, Munson cites the AT&T breakup as an example of deregulation that came too fast and with too much disruption...

...Needless to say, the partial deregulation of this industry has not been greeted with wild enthusiasm by utility executives, especially those struggling to peddle expensive, excess power...

...Unnecessary plants were built, and somehow will be paid for...

...Spending $1.8 trillion on those other purposes would do a lot more for economic growth than pouring it into more large power plants-especially ones that may never be turned on...

...Last year, electric utilities accounted for one-half of all new common stock issued in America and one-third of all new corporate financing...

...Less expensive, more compact, and far more capable than their transistorized ancestors, these computers also use far less electricity...

...No blind enthusiast for the free market, Munson recognizes that public regulation of utilities is still vital to address concerns such as safety, which private businesses are prone to ignore...

...Thus, if demand suddenly falls, the system has the flexibility to adapt...

...Appliances set to operate on 40 cycles of electric current became useless if the owner moved across the street to a house serviced by 126 cycles...

...This vicious circle-far more than environmentalists, government regulators, or Three Mile Islandhas brought America’s nuclear industry to its knees and put electric utilities in difficult straits...