Deregulation Doesnt Always Serve the Public
By Craven Crowell
April 26, 1999
The conventional wisdom runs something like this: Government regulation creates inefficiency that chokes competition and hurts consumers. Deregulation restores the natural competition of the marketplace and results in lower prices and better service.
Except when it doesnt.
Weve experienced deregulation of our airlines, and the results have been mixed. Airfares between major cities are generally lower, but regular com-mercial air service to and from many of our smaller airports has become almost nonexistent. Deregulation of the banking industry has also had some unintended consequences. Thousands of new banks have been created, but many large banks have merged, resulting, for many consumers, in less choice, not more.
Unintended consequences in the airline or banking industry can be a major inconvenience, but these inconveniences pale when compared to the disruptions in Americas electric service that could result from haphazard deregulation of the power industry. And if we think the American public gets upset about rising airfares or high ATM fees, just imagine their reaction to repeated and widespread power outages.
Without electricity the computer Im typing on will stop working, the lights will go out, the elevators will stop, the pumps at the gas station will go dry, the food in the freezer will defrost, and our hospitals will have to run on emergency generators. Electric power is the juice of modern American life, and its hard to imagine living without it, even for a short time.
As the largest generator of electric power in the United States, the Tennessee Valley Authority is keenly aware of the importance of reliable electric power. Moreover, as a public utility, we feel a special responsibility to generate the extra power margins that can keep the lights on when energy demand is high.
The independent, private utility operators also know the American economy is increasingly depen-dent on electrical powerjust as TVA doesbut their bottom-line calculations dont allow for the gen-eration of very much excess capacity just because we might, in a heat wave, find ourselves running short of power. If new generating facilities wont produce the return on investment shareholders demand, private utilities wont build them. Surplus capacity is unsold inventory. Its inefficient.
At TVA we dont have shareholders. We have the public. So we try to provide a margin of power for our customers that will keep their air conditioners running and their refrigerators humming, even on the hottest days. As a public utility, we know that keeping the lights on is as important as keeping the costs down.
Maintaining power margins is just one example of the ways in which public utilities like ours differ from the private, independent providers of electric power. Public utilities also make certain that every.-one has access to electric power, even when the cost of sending power to remote locations exceeds projected revenue. And we invest large sums in energy research and developmentoften without the clear expectation of a return on investmentso as better to prepare ourselves to meet the energy needs of the future. Public utilities like TVA also undertake numerous land and water management programs that benefit the millions of Americans who live in the re-gion we serve, and we maintain the highest standards of environmental stewardship so our natural resources are protected for future generations.
TVA has also helped industries in our region grow and prosper. Weve arranged loans for small businesses, weve helped locate industrial sites, and weve provided technical expertise to start-up com-panies and major corporations that have chosen to make the Tennessee Valley their home.
Private utilities shoulder none of these burdens because they are not accountable to the public. And for that reason alone, they should not be asked to set the standard for public service where electric power is concerned.
At TVA, power generation is still our core business, but the public interest is our bottom line. So as the deregulation process unfolds, we believe public utilities like ours will be essential to both the legislative debate, and the deregulated energy future. TVA and public utilities across the United States can provide a benchmark for public service by which the performance of all power companies can be measured. And we can help guard against those unfortunate unintended consequences that could undo the intended benefits of energy deregulation.
Massachusetts is the only state that has passed but not yet implemented energy deregulation. So theres still time to check the fine print and to make certain that deregulation ends up serving the public interest andfingers crossedlowering energy costs to Bay State consumers.
Craven Crowell is Chairman of the Tennessee Valley Authority
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