Alberta's electricity system is Canada's example of this. "de-regulation" meant the separation of generation, distribution and retail. Decades after this was supposed to lower the price of electricity, it's done the opposite. Big corporations are now guaranteed a profit at each layer of the system. There is no competition, because why would they compete if they're guaranteed a profit?
So the result is Albertans pay more than most other Canadians for electricity. Even if the actual rate is low (which it isn't), the cost of electricity is usually only 10% of my bill. The rest is "transmission" "distribution" etc. It's insanely expensive compared to next door in British Columbia.
Electric production and transmission is interesting from an economic perspective, as the physical infrastructure is almost as perfect an example as it's possible to make for something which should be governmental (or under its direct control). You just can't get working competition there. While the power itself is the perfect example of the opposite, where the market should (according to theory at least) be perfect.
> While the power itself is the perfect example of the opposite, where the market should (according to theory at least) be perfect.
Markets don’t seem to want to solve for outlier situations like extreme weather events or significant hardware malfunctions. Basically I’m talking about what happened in Texas. When it’s a safety issue, it can be hard to align incentives to make planning for outliers worthwhile to market actors.
The market way to deal with outliers is to have an options market. Basically, it is an insurance market for providing electricity on a tight day. Texas has a different way of handling it that I don’t like.
A big problem in the electricity market is that most customers don’t respond to supply shocks. They pay the same price in an emergency as in normal times. So, when it got very cold and power plants started shutting down, they used more electricity because they needed more heat! The one electricity provider who did pass on higher prices to customers and reduced consumption, Griddy Energy, was roasted in the media. Because customers didn’t respond to the shortage, utilities had to. They instituted “rolling blackouts”, which we really just blackouts for any grid that didn’t have a hospital on it.
It’s more than that - it’s that if price is your only signal, it’s always going to be cheaper as a producer to ignore long-term sustainability, which means the companies which do so will “outcompete” the companies which plan for the future, leaving you with a market full of companies utterly incapable of handling an adverse event when it comes around. It’s not just greed, it’s a fundamental problem with how the market compresses signals about companies and products.
In a spherical cow market, the power producers in Texas would have sold contracts for "electricity (except when below 40 degrees)" so consumers would have known what they're getting into.
Since contracts are superior to everything else in a spherical cow market, CEOs of companies who sold contracts for "electricity" and then couldn't supply it would have had their homes raided and everything they owned traded for generators and fuel until their customers had electricity again. Maybe the customers would've even had the right to do the raid themselves.
But given the relatively low incidence of these events, even in a spherical cow market, won't there always be a non-zero number of companies willing to make contracts they can't always fulfill, under the assumption that the risk is relatively low? And wouldn't those companies then be able to outcompete anyone else in the short term?
Which is why we have ancillary services and grid regulations.
We aim for those to be real-time markets as well. But for some services that doesn’t fit so we instead buy the services on longer contracts.
The goal is of course to have the ancillary services to be as small and few as possible since it is a supplement creating market based pricing for the things the marginal net energy market itself doesn’t provide adequately today.
> While the power itself is the perfect example of the opposite, where the market should (according to theory at least) be perfect.
Nome, it only works for fossile-based power, for any other power source (be it hydro, nuclear, solar, geothermal or wind) the marginal cost of supply is zero and all the cost is upfront cost. In that situation, the (classical economics) market equilibrium simply doesn't exist mathematically.
Marginal value (which is the relevant measure) of Hydro is not zero, because the used water has a potential value in the future when it could have been used instead. Hydro plants calculate a monetary value of the water based on a guess on future prices where the water could have been used, in addition to all kind of other smaller factors (like increased maintenance cost of shutting of, and legal requirements for minimal water in the rivers, etc). And then they bid based on this.
Any power-source which can move its production has this feature, independently of renewability.
But if you have some points in time where all the energy is delivered by intermittent power-sources, and there is insufficient power lines to transport this power elsewhere, prices can to 0, and if too much power is offered, the price becomes negative, and power producers has to pay to push in power. This is not just theoretical, it has happened in the European power market. But the equilibrium still exists. And because there are some costs associated with turning them off, it does not actually drop immediately to 0 production at negative prices.
> Marginal value (which is the relevant measure) of Hydro is not zero, because the used water has a potential value in the future when it could have been used instead.
That only describe a small fraction of hydro power: the majority of hydro in the world is “Run-of-the-river”, which means it has little storage capacity if any.
> Any power-source which can move its production has this feature, independently of renewability.
Not really. For instance, Nuclear gives you the illusion of marginal price because you can think of the cost of the uranium rods, which will be consumed faster or slower depending on your supply, but in practice your maintenance (which are also when the fuel replacement happens) are planned years in advance and are mostly paced by a mix regulatory constraints and staffing needs (your maintenance experts are in limited supply in the country, and you want to keep them busy, so you make sure the maintenance of your park is well ordered with minimal overlaps. Source: my wife makes the long terms plan nuclear maintenance at EDF, here in France).
> This is not just theoretical, it has happened in the European power market.
I know, but this has nothing to do with the question, which is in fact theoretical (“equilibrium prices” are a purely theoretical concept).
> But the equilibrium still exists.
Nope, not in the meaning of this word in the classical model (i.e. the intersection of the marginal cost curve and the demand curve).
What exists is a market price, but it's not the “equilibrium price”, and it cannot be because it doesn't exist in this setting.
Transmission is privately owned and operated but publicly controlled. Like other natural monopolies, the regulator tells the operator what to provide and how much they get paid for it.
The main reasons for this arrangement are political -- debt stays off the government's balance sheet, and labour disputes aren't "the government's fault".
There's no reason for not separating generation, distribution, and retail.
Those are completely different activities, with completely different competency requirements, economical and political characteristics.
Also, bundling them is an anti-competitive measure. What is important for generation in particular, that is a competitive market where you can have private companies.
Hydro One in Ontario is infinitely worse and was a government spearheaded privatization effort. "Sorry, not sorry" from kathleen wynne still echoing in the ears...
This whole "but government is inefficient" argument has never convinced me. Our local electric provider has as bad or worse bureaucracy and ever-increasing rates. Bureaucracy is just a symptom of aging human systems, and it can be fixed. Monopolies that serve the public good should never been profit driven, full stop.
One of the great acts of human creativity has been to convince the masses that if you install a bunch of middlemen who are looking to profit, goods and services will be cheaper and better.
I think part of the success of this message is that it’s so obviously silly that people feel silly questioning it.
if you factor in how private industry exploits negative externalities, the mystically infallible free market is quite bad. a great example is people saying nuclear energy doesn't make sense and never will when compared to fossil fuel burning energy production, but that's entirely ignoring the million+ people who die every year from illnesses directly attributable to pollution from fossil fuel energy. and the whole irreversibly killing the planet thing.
It might come from other factors than aging. The incentives are different and the way the structure evolve too. In public institutions, political tempo affects operations.. every new head of minister will reorganize things for a short while and then issues start showing up, until the next election. It makes people unable to care for efficiency after a while because they know how often friction will grow again.
Maybe small difference in finances too, very often public sector struggles with basic tools. I "feel" that private sector is a little more prone to renew that part (to satisfy the efficiency gods). That said it often backfires because they will also replace perfectly good tools or software to get the latest shiny.
Then there's mass.. but large private corps will have the same issues.
Bureaucracy is rarely ever fixed in those old institutions, even with changing leadership. The only common examples you see are usually a result of technical innovations that they fight against and later adopt 10+ years late, not from organizational reform.
Also this is not the sole purpose of companies.. SpaceX is a trillion dollar company with 0 profit.
The free market has created everything you use the more we turn the keys over to government's the worse things get.
Companies can't get infinite profits because they will be undercut by other companies COMPETING. The government can get infinite power and control though.. they have no competition.
Maximizing value to shareholders is a literal legal obligation of public companies. A company being unprofitable today does not mean they are not seeking to be highly profitable tomorrow.
To establish justice, ensure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty.
> Also this is not the sole purpose of companies.
Friedman disagrees.
> The free market has created everything you use the more we turn the keys over to government's the worse things get.
Which is why we have never needed government regulation of things like food, air, water, shelter, work safety, accessibility, or anything else. The free market provides.
> The government can get infinite power and control though
Which is why in a free society the government is answerable to the people.
The pro free market Liberian crowd are yet to give an example of their system working.
The best government is deeply imperfect but the regulation free Libertarian paradise is probably best demonstrated by some warlord somewhere. Great for him, not for any other individual.
> This whole "but government is inefficient" argument has never convinced me.
I hate this argument for a different reason. There are entire classes of problems where monetary efficiency is not the primary metrics we should optimize for, areas where things like resilience, stability, and fairness all need to come before the purely economic considerations.
Can you turn some of that into a dollar measurement? Sometimes, but not as easily as a P&L, and the P&L wins.
Exactly. I don't want my government to be efficient above all else. I want it to be over-provisioned, so when I need it, it's there. I want there to be slack in the system so that a busy day doesn't crush the service I receive. Government should not operate like a ruthlessly optimizing business.
Social Market Economy offers the best blend of capitalism and public benefit. I personally want separation between the regulatory body and the servicing body to maintain effective means of redress for harms, as well as mechanisms for both competition and failure. Thanks to the Germans, we can have it both ways.
Capitalist using money to buy capital and then sell services, brilliant.
Government using money to buy capital and then provide services, deadly socialism.
It's always just been about capitalists wanting less competition. That's why they don't want the market to decide and fight for laws to literally outlaw stuff like municipal broadband. If they are so much more efficient, they should be able to offer an equal or better service for the same or better price.
They have so much accountability. Everything is in public for inspection, they're subject to elections happening whether they like it or not, they have to follow strict laws and can be sued or even imprisoned, there's oversights and review boards. Depending on the position there's even television cameras broadcasting their work live. You can just walk in and sit down on them. In the federal government everything you do becomes public property and enters the public domain immediately upon creation. There's way more accountability...
In practice what the "small government" ideology actually does is get rid of these accountability mechanisms and put scammers and corrupt people in charge instead or relabels corruption as the policy through public-private partnerships.
Not everything is up to inspection; elections are about gathering votes - not actually improving infrastructure - and conflicting interest often result in heavy and broad compromises; oversight/review boards often just do the bare minimum. Get rid of intellectual property, and everything will be public domain.
Furthermore, nothing prevents applying these oversights over public-private partnerships (which is just a fancy term for outsourcing). The government decides who gets hired and on what conditions, so it can just enforce transparency requirements.
What are you talking about? I can vote out my government leaders in a democracy. I can't vote out Mark Zuckerberg or Elon Musk that run their organizations autocratically.
Utilities should at minimum not have a profit motive involved, but the fact that we've been so happy to deliver vast profits to shareholders instead of proofing our grid has been a real tragedy.
Is there any way out of this "shareholder value" hell? The moment a company goes public they're legally required to make stupid, short-term decisions that are worse for everyone, even the shareholders? (unless those shareholders know _when_ to sell their shares)
> The moment a company goes public they're legally required to make stupid, short-term decisions that are worse for everyone
Nope there's no legal requirement. Management is happy for you to believe there is because they get paid in stock.
The only legal requirement is to make decisions that are in the shareholders' interests, rather than the management's. That means short-term-bad, long-term-good decisions are actually strongly encouraged.
The fact that companies are organized the way they are today is not some fact of natural law. There are legal structures of ownership that have been put in place by real people, which means there are the means to completely change those ownership structures.
Allowing outside shareholders in combination with private ownership is going to result in the kinds of short term thinking that lead to the "exits" and other profit-maximizing behaviors.
One "way out" is to make laws that give good public incentives / allow people to easily incorporate as organizations where the employees are the sole owners of the entity (co-op).
No. Public companies are absolutely allowed to engage in long term strategies like "don't burn the future and reputation of the brand to temporarily juice near-term profit". The reason they don't is because the people making the decisions don't care about the future of the brand and do care about near-term profit.
> Second, absent a limited set of circumstances as defined under Revlon, a board of directors, while always required to act in an informed manner, is not under any per se duty to maximize shareholder value in the short term, even in the context of a takeover.
It’s absolutely untrue. It’s why companies are legally allowed to burn money on questionable investments or donate to political candidates if their Boards are fine with it.
In the case of the US, "legally required" is a myth. A common one, but a myth nonetheless.
> To quote the U.S. Supreme Court opinion in the recent Hobby Lobby case: “Modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not.”
Practically? a firm that isn't competitive, will have lower multiples, will trade at lower stock prices, and that will make it an attractive takeover target.
Just buy the firm, drop the practices that don't improve stock price, and then pocket the difference.
It doesn't happen all the time, and some firms may have enough of a war chest to avoid this fate.
However, the pressure does exist, and it does drive conformity in behaviour.
There needs to be regulation that discourages the behavior. Some ideas that have been floated include expanding corporate responsibility to include the workers and customers, loosening corporate responsibility laws so that companies don't have strong obligation to its shareholders, ending quarterly earning reports, reviving the ban on stock buybacks, etc.
No, because shareholders are the owners of the company. The legal requirement is more a fail safe than a mandate, because obviously the company wants to act in the best interest of the company. Without the legal mandate these companies would still almost universally act the same.
There are laws that a plumber can't come into your home and smash up your pipes. That law however is not the thing that prevents the plumber from doing that, the plumber naturally works in your common interest. It's the exact same with companies, shareholders elect a board who hires specialists to run the company. Notice the shareholders are at the top.
> The legal requirement is more a fail safe than a mandate, because obviously the company wants to act in the best interest of the company
"The company" is not a living thing. It cannot "want" something.
A company does what its management and board wish for it do to. Ergo its wants are the managements wants. Management is human, and most humans want money.
Paying management with company stock is theoretically meant to align those incentives.
"Shareholder value" is just another way of saying return on capital. Do you want to reduce return on capital? (the answer could be yes or no, just advancing the discussion)
Or do you want to redistribute the ownership of capital?
You're missing the last bit - shareholder value is return on capital for shareholders
The interests of the shareholders diverge quite strongly from the interests of electrical utility customers. It is generally a parasitic relationship where they consume resources that could have been spent improving utility service for the customers, either directly via dividends or indirectly by avaricious behavior on the part of the company in pursuit of their stock price.
> The interests of the shareholders diverge quite strongly from the interests of electrical utility customers.
Unless the customers are the shareholders, as in a co-op. The article's data seems to show that co-ops provide the cheapest electricity, which makes sense because the owners are the same people as the users, so the incentives are aligned.
this is the key. Of course, investor-owned utilities will try to charge as much as they can to maximize return on capital. The major question is "do we want to maximize return on capital in our utilities?". I would argue the answer is no since providing utilities is a public good and facilitates all other activities in the society, and forms natural monopolies.
>Or do you want to redistribute the ownership of capital?
I think that's unfair. Do you disagree that companies who go public become myopic and attempt to extract more value until they've hollowed themselves out?
It's not clear what public company status has to do with anything, but it's easy to point out that there is plenty of extraction and hollowing out on both the private and public company sides of the economy.
I would argue the effect is more pronounced in non-public companies that have private investors. Private equity especially does this, but VC backed startups also display extreme return on capital seeking behavior (albeit through growth rather than hollowing)
> Is there any way out of this "shareholder value" hell? The moment a company goes public they're legally required to make stupid, short-term decisions that are worse for everyone, even the shareholders?
Shareholder value (primacy) is one interpretation on the purpose of companies (and a relatively recent one):
* “Profits are to business as breathing is to life. Breathing is essential to life, but is not the purpose for living. Similarly, profits are essential for the existence of the corporation, but they are not the reason for its existence.” ― Charles A. O'Reilly, Lead and Disrupt: How to Solve the Innovator's Dilemma, https://en.wikipedia.org/wiki/Charles_A._O%27Reilly_III
* “On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy...your main constituencies are your employees, your customers and your products.”[72] — https://en.wikipedia.org/wiki/Jack_Welch#Politics
If you back to the mid-1900s US:
> In 1949 General Foods’ president Clarence Francis told Congress that he had a “three-way responsibility to the American consumer, to our associates in this business, and to the 68,000 [stockholders in General Foods]. We . . . would serve (the company’s) interests badly by shifting the fruits of the enterprise too heavily toward any one of those groups.” Two years later, the president of Standard Oil of New Jersey claimed that managers needed “to conduct the affairs of the enterprise in such a way as to maintain an equitable and working balance among the claims of the various directly interested groups—stockholders, employees, customers, and the public at large.” So widespread were such views that, in 1959, one writer in the Harvard Business Review complained that it was no longer “fashionable for the corporation to take gleeful pride in making money.” Instead, he complained, it was typical “for the corporation to show that it is a great innovator; more specifically, a great public benefactor; and, very particularly, that it exists ‘to serve the public’.”
> American corporate law has long drawn a bright line between for-profit and non-profit corporations. In recent years, hybrid or social enterprises have increasingly put this bright-line distinction to the test. This Article asks what we can learn about the purpose of the American business corporation by examining its history and development in the United States in its formative period from roughly 1780-1860. This brief history of corporate purpose suggests that the duty to maximize profits in the for-profit corporation is a relatively recent development. Historically, the American business corporation grew out of an earlier form of corporation that was neither for-profit nor nonprofit in today’s parlance but rather, served a multitude of municipal, religious, charitable, educational, and eventually business purposes in early nineteenth-century New England. The purposes of early American business corporations—rather than maximization of profit to private shareholders— were often overtly public, involving development of local transportation, finance, and other much-needed economic infrastructure. With the rise of factory-based manufacturing, railroads, and other capital-intensive industries in the middle decades of the nineteenth century and the advent of general incorporation statutes, the purpose of the American business corporation shifted fundamentally from public to private. By 1860, the stage was set for the modern firm.
> Michigan Supreme Court held that Henry Ford had to operate the Ford Motor Company in the interests of its shareholders, rather than for the benefit of his employees or customers.
> The moment a company goes public they're legally required to make stupid, short-term decisions that are worse for everyone, even the shareholders
The problem is a lot of companies functionally behave that way but there actually isn’t a mandate resembling anything like this, though it’s repeated so often I’m not surprised a lot of people it’s the case. Fiduciary duty doesn’t translate to “rip up and sell everything that isn’t nailed down, burn all your goodwill, and squeeze the shit out of everyone so you can extract every red cent as fast as humanly possible.” You are allowed to plan for the long-term. We just don’t and we create all sorts of incentives (bonus structures for instance) to chase short-term gains.
The investors aren’t going to rise up in all their fury and haul off a CEO to be guillotined because he invested in a project that spans more than a quarter. But unfortunately, plenty of businesses love operating as if that’s the case, because it gives an excuse to make quick dirty money. So they hide behind this erroneous perception of what constitutes “fiduciary duty.“ In the US’s particular form of capitalism it makes a lot of sense, even if it’s terrible for us as a whole.
Lately I’ve been starting to wonder if the world has changed in a way where long term planning doesn’t work anymore. If information and the reaction to it propagates so quickly that the world changes faster than your plans can adapt.
A long term plan for a company is _at least_ a decade. If your plan ended today, it started in 2016 so it has had to survive COVID, inflationary periods, several trade wars, the rise of AI and now the side effects of the war in Iran.
If your long term plan has to adapt to those in real time, is it even a long term plan? Or is it really a series of long term plans cut so short they became short term plans? I can see companies adapting to just drop the long term premise entirely.
Well, partly companies behave that way out of anticipatory obedience: if they were to really focus on the long term at the detriment of short-term profits, you'd bet that at least some (maybe influential) shareholders would protest. And partly of course the CEO's compensation depends on the shareholders being happy, not on the long-term viability of the company, so there's that...
- Some utilities consistently operate at significantly higher margins than the average. The top 10 utilities by average margin over 2021–2024 include MidAmerican Energy (27.22%), Florida Power & Light (23.51%), Nantucket Electric (23.24%), Empire District Electric (22.45%), Florida Public Utilities (20.35%), CalPeco (20.28%), Public Service Electric & Gas (19.44%), Duke Energy Carolinas (19.07%), Alabama Power (18.71%), and AEP Texas (18.63%).
Utility companies get local monopolies and in exchange their prices are regulated. Consequently they have moderate but stable, essentially guaranteed, returns.
I have literally provided you reports and company names. If you don't like the data, or don't believe the data, reconcile internally. UtilityDive is an industry publication, the financials are public.
I can't address these because most are part of larger orgs, so I am not sure where they are getting their numbers from or how they are constructed. But someone else replied with tickers (including parent companies of the ones you named) and I addressed those.
You haven’t provided the relevant metrics to address their WarmWash’s claim. If the utilities are earning outsized profits, then their shareholders would be earning outsized returns.
Comparing long term returns using a website like this would help figure out if the businesses are over performing.
Outsized profits does not necessarily mean it flows through to shareholders. That's a management choice. You can be very profitable and not buy back stock or issue dividends.
If you are insinuating corruption, then no discussion can be had since no numbers can be trusted. If there is no (or sufficiently little) corruption, then shareholder returns would be a reflection of the business’s profitability.
Call it what you want, these are unnecessary margins that should be crammed down. Regulation, nationalization, I am not picky how. Whether shareholders are seeing outsized returns from the regulatory capture, also not too concerned about.
I am fairly confident the cohort of those who support investor owned utilities are a vocal minority.
For all the non taxpayer owner utilities I am aware of, the margins and utility prices are completely controlled by government employees. Government employees that are hired by leaders that voters vote for.
Note that there exists the same incentives for publicly owned and investor owned utilities of voters today wanting lower utility prices at the expense of future utility customers by keeping capital expenses down today.
>I am fairly confident the cohort of those who support investor owned utilities are a vocal minority.
I will be the first to support only publicly owned utilities. But that has nothing to do with using bad logic and numbers to determine outsized margins.
Are there many examples of true private ownership? The power utility in my area is investor owned but publicly regulated. They cannot raise rates without approval from a public commission, and I assume are limited in other decisions as well.
In the Georgia (US state, not country) there is one investor owned utility (Georgia Power) that is regulated like you mention by the state. They have to get rates and new plants and basically everything approved by the state Public Service Commission. We'll set aside how the PSC is basically a captured regulatory agency, but in theory they are highly regulated and don't just get to do what they want. GPC serves about little more than half the state's population, and about a quarter of the physical land mass
The rest of the state is served by either local cities with their own utilities or cooperatives. The cooperatives are not government agencies, they are privately owned non-profit corporations whose customers are the owners. These companies aren't regulated by the state PSC and have the ability to set their own rates unilaterally. The only regulation they have is that they report their rates to the PSC, but it's just a report, no approval
Technically they're almost all subject to regulation by the US Government as a condition of taking loans in the 30s/40s (and most of them have rolled that financing over and continue to use it to finance operations even today) but for the most part that regulation just says they have to at least charge enough to cover their interest, and can't sell their systems without the feds' approval
They could raise rates as much as they want, but the structure of a customer-owned company like that is the profits just get redistributed back to the customers, so there's no reason or incentive to do so
And, FWIW, that 23% number from the linked article is about right. GPC is usually 15-20% higher than most of the coops and city-owned systems in Georgia (there are some that are higher). And this is even with some of those coops and cities actually buying power wholesale from GPC
As interest rates go up, investor owned utilities increase their rate of return on equity ask, pushing up consumer electricity prices. A baseline of consumer electric demand is inelastic, and required for life.
The only real proofing of the grid is distributed generation and neighborhood microgrids. Centralized generation with distant distribution is subject to single point failure with widespread impact.
Yeah, they should be like those nonprofit hospitals.....
Which is to say if the solution was that simple and the fruit that low hanging it'd be done already.
At the end of the day whether profit or not the problem is that there's no consequences for sucking and no reward for not sucking. Government agencies tend toward fiefdom expansion, amassing power and graft. For profit entities tend to try and create situations where they can extract rents on the flimsiest of pretexts. They both seem to suck for energy though perhaps government sucks a tiny bit less. Neither "solves" the problem because neither seems inclined to steadily march toward cheaper/better/faster/whatever-er energy. They both seem to try and increase the suck if left to their own devices.
I guess it depends how you fund the system then. If there are not 'profits', how would additional infrastructure and upkeep be done, without just raising rates higher to pay for it? And who would loan them the money? The government? Oh, so back to taxpayers.
A middle man that can bail out of consequences for free, while the public can never bail out of obligations and needs. There was something in game theory about such sequential games where one side can only loose if it plays.
Some use a lot more electricity than others (think companies and industries)
Public utilities receive unfair advantages like preferential financing, tax exemptions, and government infrastructure grants in your definition of subsidies, public utilities frequently receive some form of government support. (unfair as in not apples to apples comparison)
> Some use a lot more electricity than others (think companies and industries)
Okay sure, and if the utility is public, the public should get to set policies accordingly.
> Public utilities receive unfair advantages like preferential financing, tax exemptions, and government infrastructure grants in your definition of subsidies, public utilities frequently receive some form of government support
Unfair to who? Somebody who wanted to profit off the public? As a member of said public, excuse me for not being the most empathic towards people trying to make a buck off me.
This feels like kinda of a useless comparison if we don't know about the tax rates they pay, cost of capital, adjusting for geographic location and local regulations etc. I.e. the largest increase was seen in NY where it is really expensive to do anything and high taxes.
Yup, tax exceptions, cheaper financing or even government financing. It's like letting the referees play the game and then pointing out that they make more free throws.
Removing the rent-seeking middle-man class generally brings in savings. Same with healthcare.
Also the "refs" should be in charge. That is to say the working class are the refs and they should be able to build infrastructure without the capital owning class inserting itself as a rent-seeker between them and these services.
I live in a counter-example. The only water and electric utility available is city-owned and I pay triple the amount of my sister and her family that lives in another city yet has 4+ private utility companies all competing with each other. And she has a house more than twice the size of mine!
How does this system of private competing water companies actually work? Do they each have their own exclusive reservoirs and mains transmission system and water pipes right to their customer's houses/premises? And their own exclusive sewerage systems and treatment plants?
Or are they just reselling access to some ahared legacy infrastructure? In which case any "competition" is very likely an illusion.
There is only one public water system, every house connects to it. The state tasks specific companies with its maintenance (these are often not utility providers themselves, just construction/maintenance companies).
Consumers attached to that system have a metered connection, but water just flows as long as there's enough overall. Your utilities company doesn't have to move any physical water at all. They just have to eventually "settle" the amount of water that they sold to their customers. They do so by buying and then forwarding options contracts.
The electricity and gas companies are the same. They compete on
- trading (who knows best when to buy how much?) and
- consumer-facing marketing
This is how a lot of the modern economy works. Through the power of abstraction, you can run an online store without producing or shipping any items yourself and a delivery restaurant without cooking any meals.
> - trading (who knows best when to buy how much?)
That seems odd. Does a local water futures market exist.
> - consumer-facing marketing
If it's all going through the same pipes, what is there to market.
Electricity is a different story - it can be traded day ahead and even marketed, but none of that makes sense for water delivered over shared infrastructure.
I imagine this works just like with electricity. You have generation capacity, with commercial entities buying or owning generation capacity and selling the resource to consumers through community owned last mile infrastructure. The sellers need to tally up and reconcile/settle their generated capacity at some frequency (not sure if daily, monthly, yearly).
utilities don't generally "compete" with each other like how most business do - becauase that would mean they own redundant infrastructure. They are more like localized monopolies, because there is usually only 1 that operates for each given address.
What are the two cities? You'd need to control for a lot of factors to figure out if the competition is the reason or the local market rate is just lower.
Generally that's not true. Its weird people feel like they must mention any exception. Its the same as "I know someone who lived to their 90s and smoked everyday, so what's wrong with smoking?" People are aware exceptions exist and it doesn't really add anything to conversation to keep bringing them up.
Name the city because this makes no sense. You claim private utility companies are actually installing infrastructure? Or are they just resellers that provide nothing?
The only reason cities are having issues with water and electricity is because we cut taxes on the rich. Wages went down and service quality got cut to make the CEOs richer. The US has been coasting on all the infrastructure built in the 50-60s when we had a 90% federal income tax rate and CEOs were capped at making the 2026 equivalent of 5 mil a year. Tax dodging was stopped, everything was funded and life was affordable.
Utilities are one of the cases where market dynamics break down. It's very obvious why, when you realize how difficult it is build even a relatively simple electrical transmission system, or a power plant. The barriers to entry are extremely high.
Furthermore, switching from one provider to another is inherently difficult. There is only one set of pipes leading to your house, how you going to switch to an alternative? Who is going to build the line for the 1 new customer?
And finally, splitting the business across the vertical doesn't work either. Generation of power is tied to grid management, this is tied to transmission maintenance and expansion.
All things considered. Monopoly emerges naturally and rent seeking is pretty much given. There are only two options left. Either the utility is operated by government for common good, or it the monopolist is so heavily regulated and controlled by the government, that it is, in effect, its extension.
That's why most power utilities in the US are considered regulated monopolies. They are owned by shareholders but any changes must be approved by their public utilities commission first.
My electricity is produced by a cooperative. The coop has some 60k participants. And over the year it's managed to build and operate a respectable amount of wind turbines and solar installations, and it's now expanding into district heating and battery storage.
They're producing some 100GWh/year. Which is not half bad, considering they're typically at or below market price and often pay a ~6% dividend.
I think your case is unusual? Co-ops I am familiar with usually don't own generation, they buy power from a regional generator and then provide transmission infrastructure and local services to their (often rural) members.
Maybe with costs for solar dropping more co-ops are looking at adding it at least where it might work to reduce peak demands.
I'm sure it won't work everywhere, but it's been pretty successful. I wish more people would start coops to tackle problems like this. Powering some 50k families is small potatoes in the grand scheme of things, but this started out as a grassroots thing with just a handful of people. Goes to show that you don't have to be stuck with a shitty power company.
One interesting thing I’ve learned is that the utilities will manipulate projects to earn more take. So for example they will add a decommissioning in and then get regulators to approve that and now boom utility co snuck another 1% on the take. The bonuses that the C-suite execs of a public monopoly are getting… unconscionable.
(details are from memory, so let's not quibble and argue over them, my autistic friends)
Back in 1906, after the Big Earthquake happened in SF, the US Congress took pity on the city of SF and built the Hetch Hetchy dam to provide the City with reliable water supply (so the City wouldn't burn down again in the next one). The dam would also generate electricity, and that power came free (except for transmission costs, because the City owned the generation infra). So they started to lay the power lines from Hetch Hetchy to SF.
But, as it just so happened, they ran out of wires and poles just before they could reach SF. So PG&E got the contract to finish off the last mile to the City.
And after it was all over, someone found the missing materials lying in some warehouse, rusting away...
Electricity does not have to cost so much in SF, given that generation is free. And yet we pay over $0.50/KWh in the City.
I really need a source for this story. How did PG&E get wires and poles if the city couldn't get them? Was there a country-wide pole and wire shortage?
I'm all for hating on PG&E but this just sounds like a Reddit-style meme.
Sorry I know its sacrilege to say but i think there's some things the government should simply just own. Water, energy, roads, transit etc.etc.etc... There's no advantages to bringing in private enterprise, at best they merely act as rent seekers, and at worst they strip the infrastructure of all value without any maintenance, getting taxpayers to build it again.
It should not really be controversial. Classic liberal economics (from e.g. John Stuart Mill and on) generally acknowledges that natural monopolies exist and that it's generally beneficial for everyone if they are publicly owned.
Just having government run it doesn't solve all the issues, and often adds in opportunities for corruption.
Utilities have to balance investment in infrastructure. We have good reason to move away from carbon heavy sources of electricity, but investing in those new sources and the transmission capacity doesn't just happen for free.
We also need to consider delivering electricity to rural areas, which is usually quite expensive. San Francisco is considering taking over the local utility from PG&E. That might save money for local ratepayers, but would almost certainly make things more expensive for other people in the state who were effectively being subsidized by SF.
Figuring out how to do these things efficiently and balancing multiple goals is not something governments have a great track record of. I think there's a lot of opportunity to construct better market structures to incentivize investment and competition AND keep rates low.
When we say electricity is a "natural monopoly" what that means in the history of transmission utilities, states have stuck a bargain to grant monopolies in exchange for being tightly regulated, and so there's no version of reality where the state isn't already immersed in regulating them.
Every state in the country has a public utilities commission and they are constantly immersed in complex policy work from implementing legislation to working through an endless docket of cases that fine tune policy to specific tasked out responsibilities like getting a "standard offer". Sure it's complicated but I can't think of any reason that defaults to "don't regulate". We regulate healthcare too, and Medicare is always cheaper than private alternatives.
The problem with leaving private actors to their own devices when they have monopolies is that every conceivable grey area of judgment calls that impacts profitability will be subject to abuses of discretion, such as building out overpriced infrastructure, and investing in cheaper, unreliable transmission infrastructure instead of building for the long term.
In Berlin, the left (a party literally called The Left) was leading and eventually implementing an initiative to privatize tens of thousands of city-owned housing units. The same left which has just been elected to re-collectivize those same housing units.
(Tbf when they did the first of these two things, lots of housing units were unpopular and empty.)
> Classic liberal economics (from e.g. John Stuart Mill and on) generally acknowledges that natural monopolies exist and that it's generally beneficial for everyone if they are publicly owned.
The general problem here is that the "natural monopoly" tends to get drawn far too broadly.
For example, people call the telephone network a natural monopoly, which was Ma Bell's argument for making it a monopoly. But which part exactly is the "natural monopoly"? They were telling you what kind of telephone you could use (and requiring you to rent it from them), and tying not just local phone service but long distance service to the use of their last mile lines etc.
Even when they got broken up, the thing that kept the AT&T name was the (solitary, still a monopoly) long distance carrier, as if that was unquestionably still a natural monopoly. Then the internet came and proved otherwise. It turns out if you want to make a connection between New York and Los Angeles, it doesn't matter very much whether it's routed through Houston or Denver or Chicago, and if you have to you can even use a route that goes through Orlando and then Seattle. So transit is a competitive market and "long distance service is a natural monopoly" is BS.
The actual natural monopoly is the trench or utility pole on the road that carries the cable. At worst the cable itself, but installing the pole or digging the trench is way more expensive than adding another cable to an existing one (in the absence of some regulatory capture or inefficient incentives making it otherwise). And it's certainly not the things at either end of it. The other end of the cable that goes to your house should be at a local peering exchange where different companies compete to patch your cable into their equipment.
It's the same for electricity. The natural monopoly is last mile distribution, not generation or even really transmission.
And then if you give a private company a monopoly on something that isn't even a natural monopoly, of course the results are stupid. The thing that causes good results in markets is competition. So what you want in order is competitive market > local government monopoly > private monopoly. But you still don't want the second for any part of the system where you could have the first.
> A natural monopoly is a monopoly in an industry in which high infrastructure costs and other barriers to entry give a market's largest supplier an overwhelming advantage over competitors. An industry is a natural monopoly if a single firm can supply the entire market at a lower long-run average cost than if multiple firms were to operate within it.
I'm going to assume ignorance rather than snark here.
A natural monopoly is one where a product or service is:
- Widely considered fundamental to the public good (and in most cases, has very inflexible demand, meaning that people will often pay any sum to access it)
- Whose cost overheads are either fixed or grow slower than the variable costs (meaning that the investment required to scale the service not accounting for costs that scale with individual usage benefit from economies of scale)
- Easy to be gamed for profit in the hands of a profit-driven entity (either in the form of extortionate pricing directly, or cost-cutting on things like infrastructure maintenance; a good example here is how PG&E has infamously failed to maintained their power lines in California, leading to large-scale wildfires)
In the modern day, the best example of these are public utilities: water, power, road networks, public transit.
In these cases, the latter two points are used to justify public ownership, which in turn defeats the third point.
I know. The post I was answering to spoke about predatory companies that privatize the air and water of the world we were born into, or similar. Apparently it was edited to read more sober, which is good.
> Were you born into a world with electricity naturally occurring in sockets?
Massive swaths of the US required government action to get telephone and electric service. In many cities/counties, the city or county owns the power utility. In other rural/suburban situations the power utility is a non-profit cooperative that was encouraged/bootstrapped through low interest loans in the 30s and 40s. Telephone universal service was achieved because AT&T agreed to it in exchange for the government allowing it to be a (natural) monopoly
> Massive swaths of the US required government action to get telephone and electric service.
In the UK, British Telecom had plans to roll out what we'd now call "Fibre To The Premises", offering digital communications at maybe as much as 256kbps, multiple telephone lines, and even Video-on-Demand, by the middle of the 1980s across the whole country starting with rural areas.
However, it was smashed up and sold off in bits by the rapacious Conservative government in 1984. Now where I live is on track to get BT fibre - or fibre of any sort really - by 2034.
Telephone and data is an interesting one. It's an area that on its face is a natural monopoly, but in much of the US we ended up with two telecom providers
Telephone was a monopoly because it doesn't make sense to have more than one company string a wire to every house and business. But, all that wire could carry until the 90s was a voice call
Likewise, in the 60s/70s/80s cable TV became a thing but it didn't make sense to have more than one TV wire to every house, because it already has all the TV you can get, and at the time all it could carry was video channels
In the 90s these networks converged: when everything is digital, a network carrying digital signals can carry any kind of data
So, in urbanized and suburban areas we largely have a competitive market in what would otherwise be a natural monopoly. The problem is, because it's competitive in like 80-90% of the country everyone's been relieved of their universal service obligations (which applied only to voice service anyway) so there's been little incentive to expand into more rural and underserved areas
In Sweden there are many cities where the infrastructure (dark fiber to the premises) is publicly owned, but the public infrastructure owner offers no end-user service. Instead, internet service for end users is an open market where everyone uses the public infrastructure. It works really well and is really cheap for the consumers.
> it doesn't make sense to have more than one company string a wire to every house and business.
Not necessarily so. In cities it is quite normal to run 2-4 optic fibers to most buildings; my building in Brooklyn has 2 different fibers and a cable link. Equally, there are 2-3 national mobile providers which cover most of the entire US.
Wireless is much different, one physical piece of infrastructure covers a wide area, vs. wireline requires touching literally every location along the route. The economics are very different
It's why at one point we had 4 satellite TV options in the US at one time (C-Band, Primestar, DirecTV, and Dish Network all existed at the same time) but in 98% of the US there was only ever one cable company (some small cable companies did try to overbuild but it was and is extremely rare) and certainly only ever one landline phone company
And in terms of overall cost for society, is that actually a good thing? It's not like they are actually providing much redundancy. If one breaks (cut during some construction in the street), the other one likely does too. The resources used to put those redundant cables in could have been used better for other things.
I'm always bamboozled by the price of internet connection around the US and that there is a data limit one can upload or download. Perfect example of this milking while making service worse over time.
Other than the very early days of dial-up (where there were monthly limits on connect hours), my internet has always been without limit. Whether some form of dialup (POTS, ISDN, POTS with MLPPP), or DSL, VDSL, DOCSIS, or even LTE: I use what I want and the connection never slows down, and the bill stays the same.
There's an ISP that has completed a buried fiber rollout in my neighborhood as of a few days ago. I'll get plugged into that soon-enough; I got a card in the mail that says it's time to give them a call to schedule an install.
The price has stayed ~about the same over time for broadband; I've always paid about 50 bucks per month for always-on broadband. Sometimes a bit more and sometimes a bit less, but right around 50 bucks anyway. If I were to chart it with an inflation adjustment then the price would be trending downward.
Speeds, meanwhile: They trend upward. Quality of services improves.
A quarter of a century ago, my 860/160kbps DSL used to go down every morning promptly at 0200, stay down for about 10 minutes, and then come back with a different dynamic IP, and I was frequently on the phone with them about some issue or other.
The 500/20Mbps DOCSIS I have today is solid-enough that I can't think of any aspect worthy of complaint, and I've only made one phone call about it in the past 6 years.
I've always lived in the US. Am I doing it wrong?
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edit: The new fiber provider actually just called me. I signed up for 500/500 fiber for... 50 bucks per month, and they'll install it tomorrow afternoon. The price trend continues.
just about every provider of any significance has dropped data caps in the US. Once fiber hit a critical mass, the cable companies dropped their limits
That's good. I vaguely remember when some isps in US when streaming services introduced basically throttling if you were "streaming video too much". How much do you pay per month? I have an European perspective but I understand that there is much less remote places and far higher competition.
That's now what natural monopolies mean, "natural" alludes to the fact that by nature, only one company will be able to operate and maintain and other companies will be locked out due to barriers of entry or other complications. Look into it
No, but I was born into a world that requires a massive amount of collaboration, specialization, and mutual respect for one another to enable our society.
This is a wonderfully uneducated response to the above point.
Go google "natural monopoly" please. No one is arguing that work is not happening to provide a service.
We're arguing that capitalism clearly fails to achieve good outcomes for optimizing the quality and cost of that service in the case of natural monopolies.
Virtually nobody argues that completely free markets should be used for services that are natural monopolies. The actual debate in practice is between rate-regulated private companies, public owned but privately operated companies, and publicly owned and publicly operated companies. There are good and bad examples of all three.
Oh, they don't need to buy it, they already inherited from their rich parents. The world is just a set of trading cards to them at this point.
Elon Musk's fake money could buy a new $10 million mansion every single day--every single day--for THREE CENTURIES, and he wants more!
Society is delusional. We can't even collectively agree to tax psychotic money-grubbers who cannot even enjoy the fake wealth they have their names on.
To play devils advocate, in NYC which has a massive transit network. There exists a series of private transit "companies" (sometimes just a guy with a 10 person van), that provides routes that are poorly served by the publicly run transit network. The famous Chinatown buses would be another example, that run between Chinatowns in the North East, are incredibly cheap, fast, and are profitable.
This is a great example/argument for how a competitive local ISP market can work. The city/county/state should string fiber to every single house, and then various ISPs can just plug a customer into their particular switch/OLT/splitter.
A common "monopoly" of the physical last mile served by many providers traveling over it
The difficulty is that most of this competitive dynamic is already provided by IP itself (remember when you got your email address from your ISP?), and what remains is basically the physical layer technology which is exactly where the worries lie about stagnation.
There is a small angle where several ISPs can compete around customer service, data caps, equipment rental, business support, price margin, etc. While then forming larger units that put pressure on the physical provider to not stagnate the underlying infrastructure.
On the other hand I've got municipal fiber, and it just works. Great friendly local support (at least from what I understand, I don't really call them), no data caps, the price has stayed fixed for it's whole existence. I don't see any reason to want another layer on top of that, as it would only make all of those things worse.
The incumbent coax provider ("cable compay") still exists. If the municipal fiber provider stagnates on technology, then they could theoretically step up, right?. But given they had been coasting on a monopoly for decades (the other option being DSL), and that their service is still slower than the municipal gigabit (now deployed for a decade), I think that is giving them too much credit! In fact I've seen more talk about next-gen connection speeds from the municipal fiber provider.
For all the marketing about "free market competition", large corpos can be less innovative and responsive than small governments. So for the foreseeable future, I see no reason to not just voice my support for municipal fiber everywhere.
But what about large governments? Japan has amazing internet service, and NTT is mostly private (with the government retaining only 1/3 ownership).
I would trust my county to deliver my fiber internet. All my government services work great. I literally marvel every time I visit our municipal dump, which is cleaner and mode efficient than my home country of Bangladesh. But I wouldn’t trust most of the other counties I’ve lived in before to do it (Baltimore, Wilmington DE, Chicago, etc.).
Given that the argument about municipal fiber centers around a dynamic of large corpos preventing competition from small municipalities (by lobbying for state level prohibitions, etc) that seems besides the point. If a city can't get its own network off the ground, then the whole thing becomes a noop (apart from having wasted the money, which they would have done on something else regardless).
But when cities have the population density to support multiple competing Internet providers with decent physical layers and non-extractionary terms, then there generally doesn't seem to be much of a call for the city to provide its own services in the first place.
Furthermore cities that are incompetent about deploying infrastructure are going to be similarly incompetent at facilitating the permit process for private infrastructure - giving governmentesque incumbent providers a hold over a captive market regardless. So while this is a general problem that deserve its own exploration, it wouldn't seem to have much bearing on Internet access specifically. The real concern is municipalities that would be perfectly capable of providing Internet service (along with the rest of their municipal services), yet are being held back from even trying.
(Also I don't know what the Japan example demonstrates anything because 1. Japan and 2. that 1/3 ownership stake belies a much bigger controlling interest due to being the government)
There's more than just the physical pipe from the distribution point to your house
ISPs could compete on lack of congestion on their backbone, privacy, latency, price, "value add" features (like email, website hosting, etc), and speed depending on the model of the wholesale network
My point is that all of these points of "competition" would merely introduce tradeoffs that are worse than what I currently have.
Congestion/latency/data caps - I've observed no congestion, and have no traffic caps. "Competition" would create differentiation on providing less service.
Privacy - it's a municipal ISP. I'm pretty sure they're not selling my data to the surveillance industry. If it turns out they are, then I have recourse through the local democratic process rather than the standard "tough shit" response from a corpo. Given how the markets for cell service, webapps, etc work I don't have much faith that even in a competitive market, this would end up as a point of competition.
Email / website hosting / etc has nothing to do with the physical connection and therefore already has strong competition across the entire Internet. And actually this applies to the privacy point as well, with VPNs.
The model of the wholesale network is GPON. They obviously didn't string a dedicated fiber from the NOC to each house. So either speed is constrained by the gear the wholesale network buys, or the wholesale network would need to run a bunch of extra home runs so individual provider gets their own home run to light with their own gear.
I could see this last bit being a benefit in 10-20 years when gigabit isn't considered fast enough if the municipal fiber doesn't keep up. But given the municipal fiber built out the gigabit network while the coax incumbent was happy collecting rent on old infrastructure, I'm willing to give them a pass for the foreseeable future.
It's not really devil's advocate, it's the way Capitalism should be structured. If we had government covered health care I'd expect private markets of vanity surgery or uncovered procedures to still exist. If we had government run utilities you'd still have private installments for demanding needs, generators, off-grid construction, etc, etc.
They said transit as a class of natural monopoly and I showed a counter example where there are private companies entering a space where the natural monopoly already exists.
> To play devils advocate, in NYC which has a massive transit network. There exists a series of private transit "companies" (sometimes just a guy with a 10 person van), that provides routes that are poorly served by the publicly run transit network.
No, they are typically more impromptu set ups. $5 a person, leaves Queens for Bayonne at 8am, that type of thing. Some have set pick up/ drop off locations like a normal bus. Usually cash only, under the table.
Tokyo uses privately run subway/train systems and is largely considered the envy of the world with regards to transit. The united states prior to WWII mostly ran on privately run transit systems, with private companies running street car and subway lines. So it does not appear to actually be that much of a natural monopoly.
It is though? Are you gonna open a second unconnected subway system in new York and compete with them? That's always the question for a natural monopoly I thought.
Youre gonna have another company digging a second set of tunnels?
> Are you gonna open a second unconnected subway system in new York and compete with them?
Yes thats how it works in Tokyo. They get land, build stations, then dig the tunnels. Their profit comes from fares and rents around the stations that they own.
Right, but they don't directly compete by digging parallel tunnels and routes, because that would be a poor allocation of resources for everyone involved.
Japan is very much an oddball in terms of capitalist nations. They are basically the only highly capitalist nation where corporations still put a high value on delivering high quality services and products at reasonable prices. They haven't yet ran into the vulture capitalist problems every other nation has. There's nothing stopping that from happening other than cultural values AFAIK.
Britain and the US are both good examples where privatization of the rail systems has been a complete mess. The US being the worst public transit rail system of any developed nation.
Not really. Tokyo has an entirely publicly owned subway system. And a separate subway system that was govt owned and then, after buildout, sold some shares to the public via IPO.
Hello from Québec! Yes, with the right structure and guardrails in place, you definitely get better costs for citizens and businesses. Citizens can also petition the government when something needs fixing, which is better than "fuck you if you're not a shareholder".
For an example of the opposite, you can unfortunately look at the Canadian telcom oligopoly.
Consumer choice, or public good/public utility: Choose one.
A deregulated market should provide choice, if it provides monopoly the gov should step in either by breaking up (forcing choice) or making public (forcing good).
I don't think that contradicts what the person you were replying to said. Specifically, they said break it up or make it public. If there is no option to break it up, then making it public is the only option.
I think there's some examples of a split model that work well, i.e. the grid is publicly owned but the retail functions such as metering, billing, and service connections are private and have competitive providers.
> retail functions such as metering, billing, and service connections are private and have competitive providers
I.e., socialize the costs and privatize the profits.
What value can private companies bring to end consumers when they're buying from the same public producer at the same base cost? This is nothing more than a disguised handout.
People on this thread forget that when legislatures cut funding, governments also defer maintenance on the infrastructure; especially since you mention roads and transit: governments tend to underfund both of these. Private companies of course do the same when shareholders demand more profit. It’s the same.
The rest of your point I agree, but good maintenance is not a given regardless of private ownership or government ownership. In fact I would say this is part of being a monopoly: there are no competitors and no market forces to compete on reliability.
> governments also defer maintenance on the infrastructure; especially since you mention roads and transit
Roads are the outliers here because governments usually have direct oversight on them. They are more infrastructure rather than utilities.
Unlike roads, everything else discussed here (electricity, water, sewage, transit), even when public, is operated by a public company, not the government. Maintenance is part of the company's operating costs and is accounted for in the price consumer pays. And while there is no competition for reliability, there's also no obligation to maximize profits for the shareholders.
The difference is that we elect the officials in charge of the roads.
Of course they all like to push off maintenance as long as possible to avoid tax increases, but they will do them. Private industry will literally choose to wait for failure rather than do maintenance because they've discovered things can last longer than expected and they save more money by waiting for a catastrophe (and they can extra more government funds as they "don't have the resources" to fix a problem. See california's PG&E [1]).
The perfect example of this is the train system in the US and the problem we have with derailments. The US has more derailments than basically anyone else and the reason for this is that the rail owners aren't doing maintenance.
> good maintenance is not a given regardless of private ownership or government ownership.
Its not about maintenance, its about pure math and efficiency.
Natural monopolies have 0 advantage in terms of price discovery, therefore there are no market forces. And you get all the disadvantages of a monopoly without any of the advantages of capitalism.
Many purely capitalist countries still advocate for natural monopolies to be goverment run (Norway oil being public, Singapore owning all the land and housing, Spain having public healthcare) and all of those examples beat countries that have privately owned natural monopolies.
Cleveland has had two sets of power lines for a long time (despite FirstEnergy’s many attempts to shut down Cleveland Public Power). It’s not necessarily a natural monopoly.
Instead it one where incumbents try very hard to convince everyone it must be a monopoly.
Having a private market does not make something not a natural monopoly. Healthcare, education, land, and energy are famously cases where market forces do not find a lowest possible price floor.
the main things that cause a natural monopoly are things like high initial cost, a lower cost per unit created and the most important one a sub-additive cost function.
If you have a single healthcare provider for example and 2 hospitals, you can have 1 IT team to handle both medical records, that is one engineering team, 1 database, 1 security team and then you have the costs that cannot be saved such as doctors nurses and staff in each hospital.
Meanwhile if you have 2 healthcare providers you need 2 engineering teams, 2 dbs, and 2 cyber teams while the cost of doctors, nurses and staff remains untouched.
That added cost makes the "competition" subadditive. You lose more than you gain by having multiple players in the market. Which is why American's spend more in healthcare than single payer systems like the ones in Europe. Just plain old boring math. And its not even a new concept. Adam Smith calls landlords "leeches" in his works
I'm definitely on board with governments owning stuff - I think the traditional issue has been that government jobs don't attract the best talent (lower pay / whatever). So the types of people that go to government jobs are the ones that like stability and moving slow. That's probably fine - but it has also given them the reputation for being really inefficient.
The natural response is to assume that corporation will be more efficient, and there the consumer will get a better end result. And, again, that was probably true for some period of time. The problem is in a corporate world you need to grow your profits by 3-5% a year (minimum) in order to be considered a "viable" investment. So what happens when your customer base isn't growing at 3-5%? Well you cut costs to improve your profits or you raise prices or both.
End result is the consumer ends up worse off, they got a one-time efficiency gain by switching from government to corporate - but then pay for that over decades.
This was the platform of Katter’s Australian Party.
Instead the Electricity Board got privatised with promises of lower prices. Electric prices tracked inflation and general cpi from when Queensland electrified until privitasation in 1997.
Since then prices have gone up about 75% beyond inflation.
Perhaps it's the rain or I'm still not quite awake this late hour of the morning but I'm somewhat lost with privatisation in Queensland. I'm unfamiliar with something like this being part of Katter's or later the party's platform, a lot of folks like to make fun of Katter but getting down to the hard facts there's more often I find less to disagree with than other political platforms.
I had though though the power is in the hands of companies, they are govt owned [1] [2] I am inclined to say thankfully the power grid up our way is not in the hands of private energy companies or fly by night riff raff - the types that make promises of cheap power but offer up confusing power plans that are actually not that cheap, especially given what I've heard from those unfortunate enough to have been caught that I've chatted to down south. Every so often some grubby fingers try to talk up moves to entice the govt to privatise the energy grid ... something which nearly happened in the 00's.
If prices have risen steeply from the 90s in Queensland, a good guess would be it's due to a need to raise capital to further extend power networks as well as repair / replace a lot of the much older original wooden poles that reached their end of their long life as well as pull out many of the newer poles sourced from where ever, which though they initial passed muster, failed relatively quick.
My last two energy providers have been coops. In north eastern California, the coop had one feed from PG&E and the other from a company out of Reno (I forget the name). It ended up being cheaper and more stable than PG&E itself.
I will disagree - the coop was actually cheaper than the town near by that was PG&E direct. Also the stability was significantly better than PG&E alone - after the Camp Fire - PGE got extremely paranoid and had frequent shutoffs in the area. The Coop flipped to the backup provider. I think in nearly 9 years of living there, the number of power outages were under 20, the number of extended ones were like 3.
I'd prefer them to be mostly municipal or collectively owned by multiple municipalities over making them state-owned. Obviously power generation is big enough for it to be state-owned to be a workable choice.
Huh. No? There are people elected to work at say EU level, national (country) level, regional level and municipal level. The mix can be different parties and in many places the municipal councils and mayors don't even have to be in a major political party.
You have it similar in US. I bet a mayor can build sewers, collect garbage and build a lot of roads without asking the governor or president.
Or did you conflate government with public sector?
Yes and no. It is until you need to phase out coal or do a nuclear buildout. And it is still critical infrastructure.
And if you underbuild it becomes a problem for the users. And if you overbuild... well, let's assume investors won't let you do that. So, once public sector guarantees demand for decades upfront, it becomes more sensible for it to just have the plant older-built and run it itself.
I get it when there's an obvious natural monopoly, and an alternative is just infeasible to build.
I don't think it applies to electricity in many cases. If there are investors in building new electrical capacity, then it likely means that the area is underserved, and the prices are naturally higher. The government apparently did not build what the market is ready to pay a premium for.
The original Edison's electric company was private, and for-profit. It started selling electricity in 1882. I wonder how soon would a government-owned company manage instead.
If I am not mistaken, government gives tax breaks or subsidies to induce private firms to enter the market and build capacity.
The only reason investors are building capacity today, is because the demand for data centers is projected to go up.
What happened at the start of electricity, is different from what happened when it was to scale. The nature of the good decides what the most efficient form of production is advisable.
Personally, I would like to see more competition in some of those spaces. But if the government is going to enforce any sort of competitive restrictions, it should go all the way and own it. For electricity, they could own the transmission lines and allow competitors to generate and sell electricity. The government could then charge a fixed monthly fee per connection (based on capacity, so industrial users would pay a lot more than homeowners for their connections).
Private/public matters a lot less than if a system allows competition or not. There are a few infrastructure pieces (e.g. those that cross public land and unowned private property) that make sense to be publicly managed, but probably not as much as one might assume. e.g. Subway tunnels would be much better utilized if they allowed autonomous vehicles to operate in them instead of trains.
It’s not that controversial; usually I end up arguing with people who don’t believe utilities are natural monopolies rather than no government control. They usually point to starlink with the internet and solar + battery on power as incumbents that don’t need public easement. But that easement is too hard to compete with still imo and we ought to just have a public option.
It's class warfare. A few billionaires and a bunch of millionaires fighting against the other 99.5% of the world, just so they can be even more wealthy.
Most of the best public infrastructure is state owned but privately operated, like Sweden and Singapore’s transit systems. But the ownership model is less important than other things. Japan’s world leading training infrastructure is privately owned and operated. By contrast, almost all of the United States’s terrible transit systems are publicly owned and operated. Water is a public utility and almost all the United States and the water systems are in terrible disrepair.
The problem with public ownership is that it drives price is too low because it allows people to vote on prices. Your average age 60+ voter doesn’t care if lowering the water bill now means that the system will be in bad repair 30 or 50 years from now.
At the end of the day, there is no magic policy bullet to fix problems with the people. Public infrastructure in the US sucks whether it’s publicly owned or privately owned. But I bet if the Japanese trains were publicly owned instead of privately owned, they would still be pretty good.
My state deregulated natural gas which meant that despite the city owning the delivery and turning on and off the gas each for profit company had to have their own HQ, marketing budget, customer service, sales team, and C-suite.
The fixed service fee cost $40/month which was more than the natural gas consumed every month but Jan/Feb. They also make cancelling difficult, I was put on hold for 40 minutes without an music so I didn't know if I had been disconnected or was just on hold.
Electric is run by one company and their service fee is $15/mo. Their customer service is also much better.
I paid $48 for $0.97 worth of gas last month. About $40 to the public gas company for the hookup, $5.95 in a service fee to the private supplier and the balance tax.
It’s not a counter-argument for two reasons. First, China doesn’t have voters. The problem with publicly owned utilities specifically is the pressure from voters to lower prices now at the expense of maintenance for the future. Not having voters eliminates that problem. More generally, the lack of voters means that China’s public sector operates completely differently than the public sector in democracies.
Do read the second part of my statement, since arguing this further puts me in the awkward position of romanticizing China, which I do not want to do.
I will disagree by stating that China's private sector isn't the same as a western or typical market economy private firm. The degree of state ownership is and central control are hard enough to make comps easy. State support in other ways other than ownership is another topic as well.
I will also say that the Chinese government is receptive to its constituents. Not to the degree that we can expect in a democracy, but its not oblivious either.
There is a lot of writing and philosophy on this exact issue - state owned enterprise, partial to complete deregulation, state operated enterprises, etc.
At the end of the day it will be about tradeoffs. CA/TX and others "deregulated" electricity by splitting the public-side (transmission and distribution) as heavily regulated from the generators and consumer purchasing sides. In TX, nominally, this lowered rates, though it has been some time since I researched this space. What it also did was cause pretty bad second order effects for transmission providers since they can't exclude use of their owned networks due to the physics of grids. It also caused underinvestment in the grid, causing the major freeze-outs and near-collapse of the natural gas delivery pipelines that made the news.
There CAN be advantages to bringing in private enterprise, but, they need fairly strict oversight to not cash out/distribute the funds needed for infrastructure O&M/new build to shareholders.
This is not sacrilege. It is for the common good. Some people, however, would profit off the immiseration of others, by profiting off of charging higher prices for essentials, regardless of the degree to which the buyer can afford the price gouging.
Not controversial at all. Unless you're a purist who believes the state shouldn't own or operate any businesses, the only real advantage of privatization is the potential influx of capital that could be invested in modernizing infrastructure. In today's turbulent world, we're seeing how keeping such infrastructure under state ownership can be not only more practical but also more secure.
Agreed, though it's society owning, not government. Practically the same thing, but "government-owned" makes it sound like an adversarial entity and some anti-establishment folks may feel good (or entitled, even) damaging such things. But they then just hurt all of us since it's owned by all of us. (Cf. current protests in France)
Maybe in principle but as practice in many countries show governments suck at planning. We need more electricity everywhere in Western world and governments failed big time even though there were signs hard to ignore - not only compute but also electric cars.
At least make it easy to build powerplants for determined private enterprises to speed-up progress where governments fail.
This argument doesn't really stand up to scrutiny, IMO.
Say you have a section of urban highway that is severely congested. If roads are a profit-center, congestion is a strong market signal--demand outstrips supply! More people want to use your product, but your supply is insufficient. The obvious solution is to build more supply. Until you do, you're leaving money on the table! Quick, expand the road! Build a tunnel! Do something!
The exact opposite logic applies when roads are a public good. They become a cost-center, and any concern about meeting demand becomes subordinate to a thousand other concerns. The costs of building and maintaining roads remain real and immediate (They cost money! NIMBYs hate construction!), but the benefits of building and maintaining roads become abstract and distant (the benefits are: fewer complaints? More economic activity in the long run?) The laws of supply and demand no longer apply, and you find people saying insane things like "Why should we expand that congested highway? Expanding it will only draw more cars, and then it will still be congested!". In a free market, such nonsense is unthinkable. No business would ever say "Demand is so far in excess of supply that increasing supply is pointless!" Yet as soon as market incentives are removed, this nonsense becomes the default.
Every day on my commute, I spend ~30 minutes driving 80 MPH on private highway, and the instant I hit the public highway I am in bumper-to-bumper traffic, as one of the most congested stretches of 4-lane highway in one of the largest cities in the country is reduced to two lanes as it passes under another highway. It costs me 30 minutes of my life every day, and there are no current plans to resolve this bottleneck. The notion that public roads are saving me from evil rent-seeking capitalists is just silly. I prefer self-interested capitalists to incompetent public administrators.
This isn't to say that roads should be totally deregulated--incentives matter, and the state has a legitimate role to play in ensuring that consumers are protected from malicious actors. But the incentives associated with public ownership are so perverse that it's hard to imagine a private option resulting in worse outcomes.
> at worst they strip the infrastructure of all value without any maintenance, getting taxpayers to build it again.
The worst-case scenario for privatization is the default scenario with public ownership!
In this thread: a bunch of comments that don't understand that if you want more of something (power, food, housing, videos of cats, whatever), by far the best way to get it is to give the people providing the stuff more money.
Giving the government more money to do things works really well. Here in the USA we've given the governments 3x more money in real terms to run our public schools, and we've gotten worse results over those 3 decades.
Governments also get to hide real expenses that audited private enterprises never could. The "cost" on this website assumes what's paid is adequate to manage the business which is wrong.
> Governments also get to hide real expenses that audited private enterprises never could.
You present this as something inherently true, but really there is no reason for this to be the case. We could make it so government entities are significantly more transparent than would be reasonable for a private entity. In practice, that is already the case and what you said really isn't true, though I'm always in favor of more transparency.
Okay, I'll vote for the candidates that will allocate more of my tax money towards these goods and services I want and support.
It's interesting how once people were successfully swindled into privatizing everything, the rhetoric changed from "everything will be cheaper!" to "well of course it's more expensive, you want to reward them for their superior service, right?". Apparently none of these extra costs go to appeasing middlemen or lining investor pockets, all these companies clinging onto natural monopolies are just too good at what they do. They have no conflicts of interest whatsoever!
That only applies to markets. As soon as the market breaks down it no longer applies. Monopolies and cartels for instance can absorb arbitrary amount of money without growing the supply or improving quality.
Texas answers a lot of questions about how well privatization of utilities works (and the answer is often "not very well"). The electric industry in Texas has competitive rates with the rest of the country, but it also has a body count. Putting off repairs and upgrades in order to save money and make investors more money has caused several long outages during extreme weather, including in 2021 when several hundred people froze to death. I have a photo from that year of a thermometer showing 22F (-6C) inside my RV, which I was living in full-time and parked near Dallas, at the time.
And, as a customer, it's a bad experience. I have to switch providers every year, because the rates you get the first year are competitive, and then for the subsequent years they offer much worse rates, 50%-100% higher than the previous year. So, I either have to deal with that annual pain in the ass of picking a new provider and setting up billing, etc., or I pay among the highest rates in the country when the rate spikes. There's also the constant deluge of mailers from competing providers, and gangs of sales people hanging inside Walmart or going door-to-door (I have a "No Soliciting" sign, which is only occasionally respected).
I used to be a free market purist, believing most things would be better with competition, but for a natural monopoly like electricity, it's just forced inefficiency. The law requires the illusion of competition, but the real work of keeping the lights on is done by one entity. All the other power companies are just middlemen, running their own marketing and billing operations, but not doing much else.
I would be very happy to have electricity go back to being publicly-owned and operated, with regulation and oversight.
And, for another data point, the best trash/sewer/water experience is, by far, when the municipality handles all of it and there is a monopoly on those services (even if operated by a private entity). I've lived in places where you subscribed to one of several competing trash pickup providers, and that is always more expensive and provides less (rarely includes regular bulk pickups or recycling in the standard plans, for example). And, you then have loud, smelly, trash trucks rolling through your neighborhood multiple times a week. Admittedly, in those cases, it's often a rural area where picking up is more expensive for the operator due to longer distances, but even in the suburbs it costs more and does less.
Re: garbage collection, I don't think it's just urban/rural. I've never lived in the suburbs, but I've moved around enough to have experienced both public and private collection in both urban and rural settings. In all cases the quality of service was generally much higher for public garbage collection.
And yeah, similar experience for public vs private power and gas companies. A thing that I think many free market purists forget is that local officials tend to live with the knowledge that they will have hell to pay at the next election if they allow the public utilities to start pissing people off too much.
Yeah, in general, city council members are more accountable than a corporation. I can go to a meeting and yell at them. They're also living with the same service, most of the time, so they have a vested interest in making it a high quality experience. It's certainly possible to imagine bribery and other fuckery going on in local government that would make service worse or more expensive than competition, but corruption is historically pretty rare in the US (though it's been on the rise, as permission has been granted from the top). And, competition is an illusion when it comes to utilities; the competitors are all just competing to take a cut, they're not able to compete on service because they aren't actually the provider.
My city has a reputation for corruption. It isn’t great, but also we hold our governments to a higher standard. Behavior that’s worthy of a scandal when a city official does it is just everyday behavior in private businesses.
That reminds me, my hometown, the city of Hamburg, bought back the public utilities it had privatized in the 90's, following a public referendum, in 2014.
I recall that one reason was prices for electricity and gas going up after the privatization.
It turns out that privatization of public services does not yield the lowest prices for consumer as a result of market forces. Because it does not create services markets, it creates services monopolies.
Note that government-owned and investor-owned aren’t the only two options.
I live in Wyoming. We have a member-owned cooperative utility. At the end of the year, it pays every member a dividend. We vote on leadership and major policy. It’s locally responsive but still privately owned; the Governor can’t turn it into a slush fund.
I'm in Alberta, Canada where energy is (at least for now!) cheap and plentiful. I'm with a community-owned energy marketer and pay 6 cents per kwh, and just of $3 per GJ. If we paid anywhere near your rates the seperation referendum would have turned out differently!
Alberta is one of the more expensive provinces for electricity, and the average is around 20 cents per kwh as of March 2026 according to federal government:
Which also has this quote: "In Alberta, where electricity is supplied through a competitive retail market, residential prices tend to be slightly higher and more variable over time compared with most other provinces."
6 cents per kwh! Can we set up some shipping back and forth for batteries, you charge them, I pay you for it and can have cheaper energy.
This is about what we pay here for delivery back to the grid, yes pay, not earn, they don't want our solar, we have too much (yes we can turn them off, and we do).
Nobody forced Germany to shut down their nuclear plants. The US even warned them not to do it for over a decade. Obama and Merkel had a joint press conference where Merkel assured everyone that Germany had a "10 to 15-year plan". The Biden administration even sanctioned German companies building Nordstream 2 because it was a Russian geopolitical project that would be weaponized against them.
Merkel's lack of brain or personal folder in Moscow archives forced Germany.
It often hard to tell with Germans if it's their stupidity due to arrogance (they in many ways never grew out of their pre world war two self image as the most developed mentally, morally and technologically nation in whole Europe) or their corruption.
One culture thing I learned moving from an impoverished rural community to San Francisco was how little time the affluent spend on the necessities: cooking, cleaning, laundry, home improvement, shopping, etc.
Most of my free time was spent on the necessities.
Moving to SF and embracing that lifestyle (being able to afford that lifestyle...) freed me up for the pursuit of happiness.
I look at government the same way: public service should assume some of the burdens for the citizenry. utilities should be one of those things assumed by the state, paid for by taxes. The administration of which has a goal of driving down costs for customers, NOT for increasing profit
We have "utilities on the market" now. So we get to choose between the color of logo on the invoice. Every year we can switch around new year. Then lots of marketing is going on: people going door to door as well...
For sure I now pay for all these marketing campaigns: they all offer a cheap first year. So I have to switch yearly to get a good "welcome present" (that the non-switchers are paying for me).
Privatizing a commodity-service, that utilities are (electrons/water/gas -- it's all very standardized) is the most ridiculous to me. The innovation a supplier can bring you is mostly it's marketing campaign.
Sure, because you’re also paying for public utilities in other ways (taxes, inflation, regulations, etc). The government can’t give you anything it hasn’t first taken from you in one way or another.
Cost in this example is simply rate paid on your electric bill, but with the government - essentially unaudited - the bill isn't the real price. The assumptions everyone's making are just lazy.
What are you guys complaining about? "17.8¢ a kilowatt-hour at investor-owned utilities" ?? Here in San Francisco we're paying close to 50¢ a kilowatt-hour!!
Our local co-op electric utility may have a lower rate than other states, but their policies are entirely profit based. No grid-tie. No off-peak rates. Customer experience is terrible. Internal company spending reminds me of the current decor at 1600 Pennsylvania ave. And my share in the company last year, after being a customer for nearly four decades paid me $15.
I am also a counter example... My utilities are now half of what they were than when I lived in an area provided by a public utility.. (BPU.. looking at you)
I think the problem in the machine is "investors" as they have primarily a capital based value evaluation.
Nothing else has value to them apart from capital and its "profitable" usage, so the fundamental reason why corporations even exist, to collectively bring about real world value takes a back seat.
The real problem is the incentives. Since privately owned electric companies are monopolies, they usually have some sort of utility board that has to sign off on the rates, and usually this is through some sort of "reasonable" profit margin or return on capital. Therefore, the only way for a private utility to make more money is to spend more money. It's a complete inversion of normal capitalism.
In California for example, PG&E has an incentive to propose the most costly projects, make the worst deals with the union, etc. Of course the union is also very happy with this and will provide political cover for PG&E. Every extra dollar they spend on capital is an extra 10 cents every year they can charge the ratepayers and then pass on to shareholders.
You obviously see the result here where it's not just the profit margin of the private utilities that's causing the higher cost. Even if you zeroed out their profits and reduced rates accordingly, you'd still be paying more, because the private utilities spend more. So much for privatization saving money.
The fact that co-ops are even cheaper than private utilities is doubly crazy since most co-ops are rural, and the amount of wire to serve each customer is way higher than private utilities which tend to serve cities more where it's cheaper to provide service.
IMO the solution would be to make profits based on some sort of quality/cost of service benchmark rather than just expenditures. The problem of course is that it's hard to make fair metrics that aren't gameable.
That's why essential utility or otherwise operator that functions essentially for the common good / people must be in public or public-private hands with strong regulation on what is allowed and what isn't.
It does not appear to adjust for any of the things that matter. Taxes, cost of capital, generation mix, etc. I think the “insight” is impossible to call an insight with the lack of real modeling.
Some of your questions read to me more like explanatory factors than confounding variables. If cost of capital is lower for public utilities, great, that’s an argument in favor.
I actually think the most interesting factor is listed down in the “about the data” section: “ Most of the gap opened from 2020 to 2023, during the energy price spike: 25% at investor-owned utilities, 11% at public utilities and co-ops. Before and since, both rose at about the same pace.”
So, it might be basically the same story everyone complains about. When there’s a shock, companies tend to quickly hike prices higher than they need to, but after the problem is resolved they’re slow to let prices come down again, if they do at all.
And that detail casts doubt on other explanations because if they were the case we wouldn’t expect to see the divergence be largely confined to the pandemic. There was still a gap before 2020, but it looks like it had been a fairly steady ~1¢/KWh.
That doesn't explain how Silicon valley powered, owned by the city of Santa Clara, can provide electricity at 18c/kwh while the next city over PG&E charges 48c/kwh
Has Santa Clara diversified their energy and Sunnyvale did not?
Additionally the regulations between the two are not the same.
For example, in my home state of Massachusetts, for-profit utilities are required to participate in the state mandated home efficiency subsidy program, MassSave and add surcharges to the delivery charge, to a state-wide cost of $4.5 billion for 2025 - 2027.
Municipal utilities are exempt.
We’re at the bottom of the list on this post, because it’s looking at recent inflation, but municipal utilities cost much less in Mass. But there are many components to this difference.
How much more is needed to get people to put the effing phone down and pay attention to what's happening.
The vet for my cats, charges 450$ for spending 5 minutes checking the cat, 2 vaccines and out... then I ask.. are you part of a investor owned or equity owned.. they answer yes...
Do you want me to tell you about health insurance?
Why is people not angry? the "100$ er visit" option of health insurance is always 1400$ of "itemized" things...
Oh yeah... iphones are kind of cheap...
Wait a sec, were... but the rest of the electronics are cheap right? even if we will never be able to own a home?
Rammagedon? what do you mean the ps5 is 1k$? do you remember when 300$ where insane?
It is naive to think that the government can just be 23% more efficient at getting you electricity. This excludes account for tax exceptions, cheaper financing or even government financing. The government is a monopoly and not allowing competitors in with legislation and using tax dollars to be more "efficient".
"Efficient"? Nobody believes that the sourcing is more efficient. It's the profit-margin which the government doesn't need which makes the difference, they can be significantly less efficient and still beat "investors" who have shareholders to pay.
I meant "Efficient" as in delivering the power for less cost. Investors don't necessarily care about a profit margin either. Space X is a trillion dollar company and has 0 profit.
Its naive to think that removing the rent-seeking middle-man class won't lead to savings. Same with private healthcare costs vs more socialized or single-payer systems.
rent seeking middleman? I would say the government has the most special privileges of the competitors in the market no?
We have the most expensive healthcare in the world and some of the worse it is a over regulated industry full of complexity and corruption. Look at industries without government involvement, the less involvement the cheaper and better things get.
healthcare, education, and child care all suck.
tvs, software, and clothes, all cheap and very good.
I have worked as an engineer is private and public power utilities and there is not a significant difference in how efficiently things get done. All human orgs are basically the same, when you get down to the people actually doing the work. Private utilities have all the security of a public utility so the 'profit margin' is not really an everyday focus at the worker bees level in the way that it is in actual private industry.
Having seen the sausage being made in both, I would say that private utilities are very little for the additional $$$ they extra t for shareholders. I would just as soon see all power production and transmission nationalized.
I remember when water was privatized in Brisbane, Australia - instantly noticing the jump in my bill. It's clear that privatizing infrastructure like water & electricity doesn't benefit consumers (unless they are somehow investors). I understand that Amsterdam is privatizing water as well. But what can be done about this? Is the only path as consumers is to become ruthless capitalists for our own survival? I wonder where this cycle ends?
There are not-for-profile municipal utility operators in California. They form NCPA (Northern California Power Agency), the largest stake holder is SVP (Silicon Valley Power) a.k.a. The City of Santa Clara.
Something a lot of transplants don't learn for years: Palo Alto, Santa Clara, and Alameda are members of NCPA, so you don't pay PG&E, amusingly PG&E pays NCPA for access to its hydro and geothermal.
One of the reasons I left academia: in a different context my colleagues would all know to shout "correlation not causation!", "conditioning on a collider", and "no true control group!"
But if they saw this they'd immediately like, subscribe, and share broadly with positive commentary.
Privatization of utilities was always bad idea. We had a lot of it in Poland, mostly driven by "govt owning it is communism, we want to get away from what" and it just made it near universally worse
Natural monopolies are always the first suggestions to keep public owned. And you can't have 2 water suppliers piping into your apartment from the source
You can. It is just that the costs of pipes (wires) are so high that you can't both charge a reasonable price and pay for the pipes. This is why most farms are on private wells - $10k to drill a well is cheaper over 50 years than pipes to each farm. (Many Iowa farms are on public water not a well because wells in those parts tend to not produce enough water for a house's need - and they pay a lot of money per month to pay for those pipes)
This is why we say utilities are a natural monopoly. If you have the pipes/wires in place and even a little paid off you can undercut and competitor until they are bankrupt.
Even if there is only one set of pipes under the street, the owner of those pipes is constrained from acting in a predatory way if the market is free. They are disciplined by potential competition (if prices too high or lets the water quality drop, it suddenly becomes financially viable for a competitor to dig a rival pipe, or set up localized system, or offering water trucking to your site).
Under a government-granted monopoly, that threat is legally banned (except for maybe water trucking)
You are correct, but only at unrealistic levels of bad. A potential competitor risks that they lower the prices after the have dug in the pipes and that is enough that the competitor is bankrupt. Even if water quality is the issue, it is easier and cheaper for the incumbent to fix the issue than for you to dig in new pipes. Only in the case where the incumbent has worn out pipes that all need to be replaced at once (unlikely - pipes last a long time and we have had good success relining pipes in many cases: leaving only a minority that need expensive replacement at any one time).
Because the bad has to be unrealistically bad before someone can compete nobody sane will.
It would not take 5 years for a competing interest to complete a takeover bid of the water utility and implement faster/better fixes. Nor would it take 5 years for water customers (if they could) to divert the money that funds the municipal water district away from them and towards an alternative like water filtration or truck deliveries
It would take five years to complete all that. We'd certainly hope that they can manage your project better and get it started sooner than that but there is a lot of labor and there's only so many crews can do it and so many so much equipment. Your competing water utility could certainly serve the first customers in two or three years, but there's a lot of work needed and I would be surprised if they could get the whole town done in even five years.
Yeah nah, nobody getting entirely new pipes dug up under the infrastructure that's already on top of it to save few cents per litre. If you're big water using industry it might make sense but for anything residential it doesn't
Government granted monopolies are granted under oversight and regulation that would be extreme in any other scenario. Many of them don't even get to set prices. No discipline or market forces needed. The regulators just regulate predatory action.
In your example no one is going to dig a rival pipe because you can't just go around installing pipes under other people's roads and land. The permission to do that is granted to a single entity by the government, further reinforcing the natural monopoly. There is no situation where it is economically feasible to lay more pipe when you have no right to do that.
At the low end, the GAO estimates of federal spending, 3-7% is fraud, 3% is improper payments, 7-10%+ is legal but wasteful (e.g. zombie programs) - totaling 13-20%.
In the middle, DOGE (don't smite me, just citing multiple sources) estimated 30-33% was waste.
Accounting earnings are not simply the markup on electricity, or revenue collected from electric customers minus the cost of supplying them. NEE's financials include many other things such as investment earnings, gains from the sale of assets, energy futures and tax credits
DOGE isn't a source so don't cite them. They just made shit up.
The American public is stupid and wrong and their perception is not useful here. They will believe the government wastes 50% of every dollar because they have been told that, even though it's just stupidly wrong.
The GAO is actually the only information you provided. They are trustworthy and happy to be critical of every administration, and they don't get enough love for their important work.
I don't know if you realize this, but 3-7% literal fraud is actually a pretty good number for a very complicated system. 15% "waste" where it's hard to even define what "waste" is is also a good number.
Visa and Mastercard accept far higher for a far simpler fraud profile.
Also you said "This guy thinks waste in government is only 15%" and then the only data you provided has to wave many hands to get up to 13-20%. What the hell man?
That's $200B that could've, in some parts, gone into grid investment and lower electrical costs. Instead, it's the rake for financially engineering being a middleman.
I'm confident this is solved for in the long term with more coop and muni ownership of grids, alongside rapid deployment of solar and batteries so folks can go off grid if they want, as is happening across Pakistan [1] [2]; in the interim, it's annoying though, and for those who cannot afford to be squeezed for these profits, painful.
(non profit, coop, and muni grids can go to the bond market just like an investor owned utility to borrow for grid investment capital, so this is not an excuse for investor owned utilities to exist)
> Privatization supporters seem to always use waste as a boogeyman, but never the inevitable profitmaxxing for management and shareholders
That’s because under capitalism, waste and inefficiency are touted as the ultimate evil.
Making profit is the entire purpose of the whole system, so it’s inherently good, and “the right thing”.
Especially in the US, even talking about a reduction in profit is akin to blasphemy, and quickly gets one labeled a quack.
It's unfortunate, for sure. Luckily, clean tech manufacturing and deployment will eventually outpace the ability to capture energy for returns [1] [2]. China currently has enough solar PV manufacturing capacity for double current global demand, and battery manufacturing capacity is catching up. Prices will keep coming down, and eventually everyone who wants to go off the grid and has space for batteries and solar should be able to.
Just like China is cramming down legacy auto export TAM through their EV exports (BYD has surpassed Ford in international sales as of this year, as is constrained by not having enough marine vessels to export more), solar and batteries will come for investor owned utilities as well.
Now look at how much they invested in keeping the infrastructure up to date. The ones I know about are very good at the rent seeking portion but when it comes to (preventive) maintenance and capacity planning they are terrible.
Whaaaa? When you run something with the goal of making a profit that ends up costing more than when you run it without the goal of making profit? Hows that possible?
Some research suggests that clustering simply on public vs private is correlation not causation. Many public utilities in the USA are clustered around hydro electric system and dense urban system whilst private utilities pick up the more expensive to run and traditionally less well serviced markets.
We have more than enough experience to know that privatising infrastructure is often a terrible move as far as consumers are concerned. Yet we still fall for the lie of 'private efficiency'.
The truth is that the efficiency argument is just a fig leaf for the true ideological motivation to sell off publicly owned assets. The true reason is at the core of neoliberalism and it is essentially to increase investment opportunities for people with capital. Nothing (not even childcare) can be provided by people for people. It must be offered up to 'the market'.
The argument for private industry was never that they would always charge lower prices per unit, but that they would produce things more efficiently--at a lower cost per unit. Of course public providers can charge lower prices. Their sales revenues aren't their only source of funds! So the mere fact that they charge lower prices doesn't necessarily indicate lower total cost, since the low prices may simply be a subsidy which is shorn up with tax dollars.
A case in point would be the Mamdani stores that are being launched in New York City. They'll be offering groceries at a steep discount. Socialist activists could then turn around and write headlines like "private-owned grocery stores charge x% more for groceries than public providers", but would that mean that public groceries have overall lower costs than private ones? Obviously not. It would be foolish to use price data to argue that the public model is somehow better than the private one. You would need to know whether the point-of-sale savings represent actual savings to the consumer, or whether the difference is being paid in some other way.
It doesn't do consumers any good to pay $50 less their utility bill if that $50 savings is made possible by charging an additional $60 in state and local taxes.
It's not even that though. Looks like public utilities are only offered in areas where those utilities are cheap to provide or abundant, and private utilities fill in a gap in harder to reach areas.
The study even points this out as a foot-note but then focuses on rate of price increase versus nominal price. It should not come as a surprise that in areas where utilities are less abundant the price will increase faster than in areas where that same utility is plentiful.
That’s roughly the opposite of the development of electric utilities in the US. The IOUs owned dense urban areas and refused to electrify further out. It was only the rise of public municipal utilities that got them to go to the states, implement the regulatory compact, be granted rate of return, etc., and then they began building out more.
That is the historic situation yes. However it doesn't change how things are today. the municipal utilities that remain have lower costs because they don't have the more expensive structures.
Some of it goes to bonuses and dividends, but 23% is a really big number.
I think a big part of that number is risk, dividends are tied to risk too.
The very idea of investing is that you take risks in exchange for profits. That is, if it fails, you lose your capital, if it succeeds, you become richer. A public provider doesn't work the same way, risk is covered by taxpayer money. If it fails, taxpayers foot the bill, if it succeeds, cheaper service.
NEE isn't a pure utility, they are a hybrid of two businesses. Their Florida Power & Light (FPL) subsidiary is a regulated utility which the state government caps ROEs of at 10.95%.
Their other subsidiary is NextEra Energy Resources, which is not a regulated utility, and has 60% net margins. This business is basically an unregulated competitive wind and solar developer. They take full risk if they can't sell their power, but can build wherever they think there are customers willing to pay. 35% of their power is sold straight to industrial customers at private contracted prices, the rest into the grid.
Governments don't have profits. In the last 30 years, they've all racked up massive amounts of debt. What do we call what the guys who run our government make since they only have debt (and not profits to speak of ...).
Alberta's electricity system is Canada's example of this. "de-regulation" meant the separation of generation, distribution and retail. Decades after this was supposed to lower the price of electricity, it's done the opposite. Big corporations are now guaranteed a profit at each layer of the system. There is no competition, because why would they compete if they're guaranteed a profit?
So the result is Albertans pay more than most other Canadians for electricity. Even if the actual rate is low (which it isn't), the cost of electricity is usually only 10% of my bill. The rest is "transmission" "distribution" etc. It's insanely expensive compared to next door in British Columbia.
Wait, they privatized transmission as well?
Electric production and transmission is interesting from an economic perspective, as the physical infrastructure is almost as perfect an example as it's possible to make for something which should be governmental (or under its direct control). You just can't get working competition there. While the power itself is the perfect example of the opposite, where the market should (according to theory at least) be perfect.
> While the power itself is the perfect example of the opposite, where the market should (according to theory at least) be perfect.
Markets don’t seem to want to solve for outlier situations like extreme weather events or significant hardware malfunctions. Basically I’m talking about what happened in Texas. When it’s a safety issue, it can be hard to align incentives to make planning for outliers worthwhile to market actors.
The market way to deal with outliers is to have an options market. Basically, it is an insurance market for providing electricity on a tight day. Texas has a different way of handling it that I don’t like.
A big problem in the electricity market is that most customers don’t respond to supply shocks. They pay the same price in an emergency as in normal times. So, when it got very cold and power plants started shutting down, they used more electricity because they needed more heat! The one electricity provider who did pass on higher prices to customers and reduced consumption, Griddy Energy, was roasted in the media. Because customers didn’t respond to the shortage, utilities had to. They instituted “rolling blackouts”, which we really just blackouts for any grid that didn’t have a hospital on it.
It’s more than that - it’s that if price is your only signal, it’s always going to be cheaper as a producer to ignore long-term sustainability, which means the companies which do so will “outcompete” the companies which plan for the future, leaving you with a market full of companies utterly incapable of handling an adverse event when it comes around. It’s not just greed, it’s a fundamental problem with how the market compresses signals about companies and products.
In a spherical cow market, the power producers in Texas would have sold contracts for "electricity (except when below 40 degrees)" so consumers would have known what they're getting into.
Since contracts are superior to everything else in a spherical cow market, CEOs of companies who sold contracts for "electricity" and then couldn't supply it would have had their homes raided and everything they owned traded for generators and fuel until their customers had electricity again. Maybe the customers would've even had the right to do the raid themselves.
But given the relatively low incidence of these events, even in a spherical cow market, won't there always be a non-zero number of companies willing to make contracts they can't always fulfill, under the assumption that the risk is relatively low? And wouldn't those companies then be able to outcompete anyone else in the short term?
Which is why we have ancillary services and grid regulations.
We aim for those to be real-time markets as well. But for some services that doesn’t fit so we instead buy the services on longer contracts.
The goal is of course to have the ancillary services to be as small and few as possible since it is a supplement creating market based pricing for the things the marginal net energy market itself doesn’t provide adequately today.
https://en.wikipedia.org/wiki/Ancillary_services
> While the power itself is the perfect example of the opposite, where the market should (according to theory at least) be perfect.
Nome, it only works for fossile-based power, for any other power source (be it hydro, nuclear, solar, geothermal or wind) the marginal cost of supply is zero and all the cost is upfront cost. In that situation, the (classical economics) market equilibrium simply doesn't exist mathematically.
Marginal value (which is the relevant measure) of Hydro is not zero, because the used water has a potential value in the future when it could have been used instead. Hydro plants calculate a monetary value of the water based on a guess on future prices where the water could have been used, in addition to all kind of other smaller factors (like increased maintenance cost of shutting of, and legal requirements for minimal water in the rivers, etc). And then they bid based on this.
Any power-source which can move its production has this feature, independently of renewability.
But if you have some points in time where all the energy is delivered by intermittent power-sources, and there is insufficient power lines to transport this power elsewhere, prices can to 0, and if too much power is offered, the price becomes negative, and power producers has to pay to push in power. This is not just theoretical, it has happened in the European power market. But the equilibrium still exists. And because there are some costs associated with turning them off, it does not actually drop immediately to 0 production at negative prices.
> Marginal value (which is the relevant measure) of Hydro is not zero, because the used water has a potential value in the future when it could have been used instead.
That only describe a small fraction of hydro power: the majority of hydro in the world is “Run-of-the-river”, which means it has little storage capacity if any.
> Any power-source which can move its production has this feature, independently of renewability.
Not really. For instance, Nuclear gives you the illusion of marginal price because you can think of the cost of the uranium rods, which will be consumed faster or slower depending on your supply, but in practice your maintenance (which are also when the fuel replacement happens) are planned years in advance and are mostly paced by a mix regulatory constraints and staffing needs (your maintenance experts are in limited supply in the country, and you want to keep them busy, so you make sure the maintenance of your park is well ordered with minimal overlaps. Source: my wife makes the long terms plan nuclear maintenance at EDF, here in France).
> This is not just theoretical, it has happened in the European power market.
I know, but this has nothing to do with the question, which is in fact theoretical (“equilibrium prices” are a purely theoretical concept).
> But the equilibrium still exists.
Nope, not in the meaning of this word in the classical model (i.e. the intersection of the marginal cost curve and the demand curve).
What exists is a market price, but it's not the “equilibrium price”, and it cannot be because it doesn't exist in this setting.
That's not really accurate. All of those other power sources have ongoing maintenance costs as well, and "making back our investment" is also a cost.
That's not marginal cost though, the full cost (from either maintenance or capital) is due no matter how much electricity is produced.
It does. At some point the next marginal investor looks at the market and can’t make their money back.
But it is a problem for legacy thermal electricity producers being undercut by renewables and storage.
Transmission is privately owned and operated but publicly controlled. Like other natural monopolies, the regulator tells the operator what to provide and how much they get paid for it.
The main reasons for this arrangement are political -- debt stays off the government's balance sheet, and labour disputes aren't "the government's fault".
There's no reason for not separating generation, distribution, and retail.
Those are completely different activities, with completely different competency requirements, economical and political characteristics.
Also, bundling them is an anti-competitive measure. What is important for generation in particular, that is a competitive market where you can have private companies.
That works in theory. In practice each company has their own overhead which increases their service fees.
They regulated nat gas in my state and the service fee is more than the gas consumed.
> They regulated nat gas in my state
You mean they privatized it?
And the Canadian power companies have used all that excess profit to buy up US power compiles. Rinse and repeat
Hydro One in Ontario is infinitely worse and was a government spearheaded privatization effort. "Sorry, not sorry" from kathleen wynne still echoing in the ears...
Well the OLP did pay for that mistake in the next election, that's for sure.
Ontario privatized Hydro as well
This whole "but government is inefficient" argument has never convinced me. Our local electric provider has as bad or worse bureaucracy and ever-increasing rates. Bureaucracy is just a symptom of aging human systems, and it can be fixed. Monopolies that serve the public good should never been profit driven, full stop.
One of the great acts of human creativity has been to convince the masses that if you install a bunch of middlemen who are looking to profit, goods and services will be cheaper and better.
I think part of the success of this message is that it’s so obviously silly that people feel silly questioning it.
for liquid markets, the evidence for this is quite good.
i think it is beyond clear that some of you all have never worked in federal government to have such a rosy outlook
if you factor in how private industry exploits negative externalities, the mystically infallible free market is quite bad. a great example is people saying nuclear energy doesn't make sense and never will when compared to fossil fuel burning energy production, but that's entirely ignoring the million+ people who die every year from illnesses directly attributable to pollution from fossil fuel energy. and the whole irreversibly killing the planet thing.
It might come from other factors than aging. The incentives are different and the way the structure evolve too. In public institutions, political tempo affects operations.. every new head of minister will reorganize things for a short while and then issues start showing up, until the next election. It makes people unable to care for efficiency after a while because they know how often friction will grow again.
Maybe small difference in finances too, very often public sector struggles with basic tools. I "feel" that private sector is a little more prone to renew that part (to satisfy the efficiency gods). That said it often backfires because they will also replace perfectly good tools or software to get the latest shiny.
Then there's mass.. but large private corps will have the same issues.
Bureaucracy is rarely ever fixed in those old institutions, even with changing leadership. The only common examples you see are usually a result of technical innovations that they fight against and later adopt 10+ years late, not from organizational reform.
The government is a monopoly...
And as unconvincing as "government is inefficient" in this case
Yes but the governments sole purpose isn’t to return infinite profits to shareholders………….
So what is the government's sole purpose?
Also this is not the sole purpose of companies.. SpaceX is a trillion dollar company with 0 profit.
The free market has created everything you use the more we turn the keys over to government's the worse things get.
Companies can't get infinite profits because they will be undercut by other companies COMPETING. The government can get infinite power and control though.. they have no competition.
> Companies can't get infinite profits because they will be undercut by other companies COMPETING.
Isn’t that what this very link is about? Where is the competition and lower prices?
Power, water, food etc the story is the same - or at least it is where I am. New Zealand.
The Party told you to reject the evidence of your eyes and ears. It was their final, most essential, demand.
Why are you pretending that utilities exist in a "free market" in any way?
I am arguing they should. We cannot afford to let the government control energy going forward.
I’m pretty sure many of us are actively unable to afford the private energy we’re having to pay for today.
> SpaceX is a trillion dollar company with 0 profit.
And it got there in part through the evisceration of NASA.
> The free market has created everything you use the more we turn the keys over to government's the worse things get.
Government funds research that has brought us such advances as moon landings, computers, and the internet. What an odd example you chose in SpaceX
The SpaceX example was to demonstrate how profits aren't the sole goal of companies.
Yes after the monopoly of NASA ended we now have several real space companies doing real advancement.
I personally have never used one of these "government computers" have you?
Maximizing value to shareholders is a literal legal obligation of public companies. A company being unprofitable today does not mean they are not seeking to be highly profitable tomorrow.
No it is literally not, and that misconception needs to die.
> The SpaceX example was to demonstrate how profits aren't the sole goal of companies.
What would you say Musk’s goal is? And do we want more of that?
> So what is the government's sole purpose?
To establish justice, ensure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty.
> Also this is not the sole purpose of companies.
Friedman disagrees.
> The free market has created everything you use the more we turn the keys over to government's the worse things get.
Which is why we have never needed government regulation of things like food, air, water, shelter, work safety, accessibility, or anything else. The free market provides.
> The government can get infinite power and control though
Which is why in a free society the government is answerable to the people.
> The free market has created everything you use the more we turn the keys over to government's the worse things get.
This might be your personal ideological creed, but it is not a self-evident axiom you can just assert with zero backing.
> Companies can't get infinite profits because they will be undercut by other companies COMPETING
Then why haven't they?
> The government can get infinite power and control though.. they have no competition.
Are you aware other countries with their own governments exist?
> This might be your personal ideological creed, but it is not a self-evident axiom you can just assert with zero backing.
Give an example of something the government does better than the market?
> Then why haven't they? Give an example where they haven't?
> Are you aware other countries with their own governments exist? And they all lose the most free market America? Why would we do more like them?
> Give an example of something the government does better than the market?
Roads, electricity, water, heathcare, pensions, public transportation, and social services.
The pro free market Liberian crowd are yet to give an example of their system working.
The best government is deeply imperfect but the regulation free Libertarian paradise is probably best demonstrated by some warlord somewhere. Great for him, not for any other individual.
They always think they will be king of the hill.
> Give an example of something the government does better than the market?
This thread's topic, for starters?
> Give an example where they haven't?
This thread's topic, for starters?
> And they all lose the most free market America? Why would we do more like them?
I'm not quite sure what you're saying here, could you rephrase?
Yes. Instead they return infinite power to elites and politicians.
Your argument still applies to capitalists except we don't even get the fig leaf of a vote, so what's your point?
You get to vote with your dollars and choose other options.
Mindlessly repeating slogans like this is not convincing anyone this is an opinion to be taken seriously.
You can vote for other politicians too.
With the obliteration of small business you can choose to buy from the oligarchs or go make it yourself.
> This whole "but government is inefficient" argument has never convinced me.
I hate this argument for a different reason. There are entire classes of problems where monetary efficiency is not the primary metrics we should optimize for, areas where things like resilience, stability, and fairness all need to come before the purely economic considerations.
Can you turn some of that into a dollar measurement? Sometimes, but not as easily as a P&L, and the P&L wins.
Exactly. I don't want my government to be efficient above all else. I want it to be over-provisioned, so when I need it, it's there. I want there to be slack in the system so that a busy day doesn't crush the service I receive. Government should not operate like a ruthlessly optimizing business.
Its any job where you feel you have the customer by the balls, held hostage, that thus disolves into a one sided free for all.
"government is inefficient" is a canard spit out by captalists as part of their propaganda program. Same with "you're better off without a union."
Profit going to capitalist owners who don't do any work is an inefficient allocation, IMO, more than an "inefficient" government.
Social Market Economy offers the best blend of capitalism and public benefit. I personally want separation between the regulatory body and the servicing body to maintain effective means of redress for harms, as well as mechanisms for both competition and failure. Thanks to the Germans, we can have it both ways.
Capitalist using money to buy capital and then sell services, brilliant.
Government using money to buy capital and then provide services, deadly socialism.
It's always just been about capitalists wanting less competition. That's why they don't want the market to decide and fight for laws to literally outlaw stuff like municipal broadband. If they are so much more efficient, they should be able to offer an equal or better service for the same or better price.
Government using people's taxes to waste money with 0 accountability
They have so much accountability. Everything is in public for inspection, they're subject to elections happening whether they like it or not, they have to follow strict laws and can be sued or even imprisoned, there's oversights and review boards. Depending on the position there's even television cameras broadcasting their work live. You can just walk in and sit down on them. In the federal government everything you do becomes public property and enters the public domain immediately upon creation. There's way more accountability...
In practice what the "small government" ideology actually does is get rid of these accountability mechanisms and put scammers and corrupt people in charge instead or relabels corruption as the policy through public-private partnerships.
Not everything is up to inspection; elections are about gathering votes - not actually improving infrastructure - and conflicting interest often result in heavy and broad compromises; oversight/review boards often just do the bare minimum. Get rid of intellectual property, and everything will be public domain.
Furthermore, nothing prevents applying these oversights over public-private partnerships (which is just a fancy term for outsourcing). The government decides who gets hired and on what conditions, so it can just enforce transparency requirements.
In many places I can see every single government employee's salary, down to the janitor. Which public company has the same level of transparency?
Yes, a government has never wasted tax money by giving a contract to a private company before.
Those companies that win big pork filled contracts would never have any incentive to get the company to waste tax dollars.
Adding the profit motive in here definitely helps prevent waste
It's a lot easier for me to vote for someone with better policies than it is for me to get the CEO of a utility company fired.
What are you talking about? I can vote out my government leaders in a democracy. I can't vote out Mark Zuckerberg or Elon Musk that run their organizations autocratically.
Utilities should at minimum not have a profit motive involved, but the fact that we've been so happy to deliver vast profits to shareholders instead of proofing our grid has been a real tragedy.
Is there any way out of this "shareholder value" hell? The moment a company goes public they're legally required to make stupid, short-term decisions that are worse for everyone, even the shareholders? (unless those shareholders know _when_ to sell their shares)
> The moment a company goes public they're legally required to make stupid, short-term decisions that are worse for everyone
Nope there's no legal requirement. Management is happy for you to believe there is because they get paid in stock.
The only legal requirement is to make decisions that are in the shareholders' interests, rather than the management's. That means short-term-bad, long-term-good decisions are actually strongly encouraged.
I think what it really means is that the public interest means nothing and companies will profit by any means necessary.
The fact that companies are organized the way they are today is not some fact of natural law. There are legal structures of ownership that have been put in place by real people, which means there are the means to completely change those ownership structures.
Allowing outside shareholders in combination with private ownership is going to result in the kinds of short term thinking that lead to the "exits" and other profit-maximizing behaviors.
One "way out" is to make laws that give good public incentives / allow people to easily incorporate as organizations where the employees are the sole owners of the entity (co-op).
> The moment a company goes public they're legally required to make stupid, short-term decisions that are worse for everyone
FWIW this is a myth.
Maybe it's overstated? It cannot possibly be a myth.
No. Public companies are absolutely allowed to engage in long term strategies like "don't burn the future and reputation of the brand to temporarily juice near-term profit". The reason they don't is because the people making the decisions don't care about the future of the brand and do care about near-term profit.
https://law.justia.com/cases/delaware/supreme-court/1990/571...
> Second, absent a limited set of circumstances as defined under Revlon, a board of directors, while always required to act in an informed manner, is not under any per se duty to maximize shareholder value in the short term, even in the context of a takeover.
It’s absolutely untrue. It’s why companies are legally allowed to burn money on questionable investments or donate to political candidates if their Boards are fine with it.
In the case of the US, "legally required" is a myth. A common one, but a myth nonetheless.
> To quote the U.S. Supreme Court opinion in the recent Hobby Lobby case: “Modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not.”
https://www.nytimes.com/roomfordebate/2015/04/16/what-are-co...
An adjacent commenter explained further: https://news.ycombinator.com/item?id=50209678
Short term thinking is because of incentives. Executives are given options so they want to juice the stock price while they are CEO.
eh...
You would be right technically.
Practically? a firm that isn't competitive, will have lower multiples, will trade at lower stock prices, and that will make it an attractive takeover target.
Just buy the firm, drop the practices that don't improve stock price, and then pocket the difference.
It doesn't happen all the time, and some firms may have enough of a war chest to avoid this fate.
However, the pressure does exist, and it does drive conformity in behaviour.
There needs to be regulation that discourages the behavior. Some ideas that have been floated include expanding corporate responsibility to include the workers and customers, loosening corporate responsibility laws so that companies don't have strong obligation to its shareholders, ending quarterly earning reports, reviving the ban on stock buybacks, etc.
No, because shareholders are the owners of the company. The legal requirement is more a fail safe than a mandate, because obviously the company wants to act in the best interest of the company. Without the legal mandate these companies would still almost universally act the same.
There are laws that a plumber can't come into your home and smash up your pipes. That law however is not the thing that prevents the plumber from doing that, the plumber naturally works in your common interest. It's the exact same with companies, shareholders elect a board who hires specialists to run the company. Notice the shareholders are at the top.
> The legal requirement is more a fail safe than a mandate, because obviously the company wants to act in the best interest of the company
"The company" is not a living thing. It cannot "want" something.
A company does what its management and board wish for it do to. Ergo its wants are the managements wants. Management is human, and most humans want money.
Paying management with company stock is theoretically meant to align those incentives.
"Shareholder value" is just another way of saying return on capital. Do you want to reduce return on capital? (the answer could be yes or no, just advancing the discussion)
Or do you want to redistribute the ownership of capital?
You're missing the last bit - shareholder value is return on capital for shareholders
The interests of the shareholders diverge quite strongly from the interests of electrical utility customers. It is generally a parasitic relationship where they consume resources that could have been spent improving utility service for the customers, either directly via dividends or indirectly by avaricious behavior on the part of the company in pursuit of their stock price.
> The interests of the shareholders diverge quite strongly from the interests of electrical utility customers.
Unless the customers are the shareholders, as in a co-op. The article's data seems to show that co-ops provide the cheapest electricity, which makes sense because the owners are the same people as the users, so the incentives are aligned.
>The interests of the shareholders diverge quite strongly from the interests of electrical utility customers
That is true for most businesses. People in different circumstances have different economic wants and needs, that is a neutral fact.
The parasistism you describe is only enabled by barriers to competition.
this is the key. Of course, investor-owned utilities will try to charge as much as they can to maximize return on capital. The major question is "do we want to maximize return on capital in our utilities?". I would argue the answer is no since providing utilities is a public good and facilitates all other activities in the society, and forms natural monopolies.
>Or do you want to redistribute the ownership of capital?
I think that's unfair. Do you disagree that companies who go public become myopic and attempt to extract more value until they've hollowed themselves out?
It's not clear what public company status has to do with anything, but it's easy to point out that there is plenty of extraction and hollowing out on both the private and public company sides of the economy.
I would argue the effect is more pronounced in non-public companies that have private investors. Private equity especially does this, but VC backed startups also display extreme return on capital seeking behavior (albeit through growth rather than hollowing)
So the problem is mostly just outside meddling?
Disrupt natural monopolies. Have government provide a common good.
https://en.wikipedia.org/wiki/Long-Term_Stock_Exchange perhaps
Have yourself a read about "Social Market Economy", the best kind of capitalism.
> Is there any way out of this "shareholder value" hell? The moment a company goes public they're legally required to make stupid, short-term decisions that are worse for everyone, even the shareholders?
Shareholder value (primacy) is one interpretation on the purpose of companies (and a relatively recent one):
* https://en.wikipedia.org/wiki/Friedman_doctrine
There are others:
* “Profits are to business as breathing is to life. Breathing is essential to life, but is not the purpose for living. Similarly, profits are essential for the existence of the corporation, but they are not the reason for its existence.” ― Charles A. O'Reilly, Lead and Disrupt: How to Solve the Innovator's Dilemma, https://en.wikipedia.org/wiki/Charles_A._O%27Reilly_III
* “On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy...your main constituencies are your employees, your customers and your products.”[72] — https://en.wikipedia.org/wiki/Jack_Welch#Politics
If you back to the mid-1900s US:
> In 1949 General Foods’ president Clarence Francis told Congress that he had a “three-way responsibility to the American consumer, to our associates in this business, and to the 68,000 [stockholders in General Foods]. We . . . would serve (the company’s) interests badly by shifting the fruits of the enterprise too heavily toward any one of those groups.” Two years later, the president of Standard Oil of New Jersey claimed that managers needed “to conduct the affairs of the enterprise in such a way as to maintain an equitable and working balance among the claims of the various directly interested groups—stockholders, employees, customers, and the public at large.” So widespread were such views that, in 1959, one writer in the Harvard Business Review complained that it was no longer “fashionable for the corporation to take gleeful pride in making money.” Instead, he complained, it was typical “for the corporation to show that it is a great innovator; more specifically, a great public benefactor; and, very particularly, that it exists ‘to serve the public’.”
* https://law.temple.edu/10q/purpose-corporation-brief-history...
Or further:
> American corporate law has long drawn a bright line between for-profit and non-profit corporations. In recent years, hybrid or social enterprises have increasingly put this bright-line distinction to the test. This Article asks what we can learn about the purpose of the American business corporation by examining its history and development in the United States in its formative period from roughly 1780-1860. This brief history of corporate purpose suggests that the duty to maximize profits in the for-profit corporation is a relatively recent development. Historically, the American business corporation grew out of an earlier form of corporation that was neither for-profit nor nonprofit in today’s parlance but rather, served a multitude of municipal, religious, charitable, educational, and eventually business purposes in early nineteenth-century New England. The purposes of early American business corporations—rather than maximization of profit to private shareholders— were often overtly public, involving development of local transportation, finance, and other much-needed economic infrastructure. With the rise of factory-based manufacturing, railroads, and other capital-intensive industries in the middle decades of the nineteenth century and the advent of general incorporation statutes, the purpose of the American business corporation shifted fundamentally from public to private. By 1860, the stage was set for the modern firm.
* https://repository.law.umich.edu/mbelr/vol9/iss1/2/
The idea that it is some kind of 'legal requirement' is also a myth:
* https://scholarship.law.cornell.edu/facpub/771/
This behavior may have started with Dodge v. Ford.
tl;dr Ford wanted to invest profits back into Ford company and Dodge forced them in court to pay dividends instead.
https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co.
> Michigan Supreme Court held that Henry Ford had to operate the Ford Motor Company in the interests of its shareholders, rather than for the benefit of his employees or customers.
That quoted sentence does not accurately summarize the ruling; see §Significance in the article.
For a fuller treatment see:
* https://scholarship.law.cornell.edu/facpub/771/
> The moment a company goes public they're legally required to make stupid, short-term decisions that are worse for everyone, even the shareholders
The problem is a lot of companies functionally behave that way but there actually isn’t a mandate resembling anything like this, though it’s repeated so often I’m not surprised a lot of people it’s the case. Fiduciary duty doesn’t translate to “rip up and sell everything that isn’t nailed down, burn all your goodwill, and squeeze the shit out of everyone so you can extract every red cent as fast as humanly possible.” You are allowed to plan for the long-term. We just don’t and we create all sorts of incentives (bonus structures for instance) to chase short-term gains.
The investors aren’t going to rise up in all their fury and haul off a CEO to be guillotined because he invested in a project that spans more than a quarter. But unfortunately, plenty of businesses love operating as if that’s the case, because it gives an excuse to make quick dirty money. So they hide behind this erroneous perception of what constitutes “fiduciary duty.“ In the US’s particular form of capitalism it makes a lot of sense, even if it’s terrible for us as a whole.
Lately I’ve been starting to wonder if the world has changed in a way where long term planning doesn’t work anymore. If information and the reaction to it propagates so quickly that the world changes faster than your plans can adapt.
A long term plan for a company is _at least_ a decade. If your plan ended today, it started in 2016 so it has had to survive COVID, inflationary periods, several trade wars, the rise of AI and now the side effects of the war in Iran.
If your long term plan has to adapt to those in real time, is it even a long term plan? Or is it really a series of long term plans cut so short they became short term plans? I can see companies adapting to just drop the long term premise entirely.
Well, partly companies behave that way out of anticipatory obedience: if they were to really focus on the long term at the detriment of short-term profits, you'd bet that at least some (maybe influential) shareholders would protest. And partly of course the CEO's compensation depends on the shareholders being happy, not on the long-term viability of the company, so there's that...
If you can share the tickers of these "vast profits to shareholders" utilities, I'd be delighted.
As far as I can tell utility companies are pretty bad at "vast profits to shareholders".
Utilities have made $200B+ in profit since 2021, new report says - https://www.utilitydive.com/news/utilities-have-made-200b-in... - March 17th, 2026
Paying for Their Profits: How Ratepayers Foot the Bill for Soaring Utility Profits - https://energyandpolicy.org/utility-profit-report/ - March 12th, 2026
- Some utilities consistently operate at significantly higher margins than the average. The top 10 utilities by average margin over 2021–2024 include MidAmerican Energy (27.22%), Florida Power & Light (23.51%), Nantucket Electric (23.24%), Empire District Electric (22.45%), Florida Public Utilities (20.35%), CalPeco (20.28%), Public Service Electric & Gas (19.44%), Duke Energy Carolinas (19.07%), Alabama Power (18.71%), and AEP Texas (18.63%).
Tickers please. I can make any flashy story about any industry if I hide a holistic picture of their finances.
Here you go: XEL, AEP, SO, EIX, CPK, AQN, NGG, NEE
Thanks
These are their five year stock gains, with the general market for reference.
Market (SP500): 68%
Market(tech): 89%
XEL: +20%
AEP: +51%
SO: +47%
EIX: -5%
CPK: +2.5%
AQN: -64%
NGG: +30%
NEE: -3.5%
Looks like a pretty bad industry for profits, even stacking the dividend on AEP, it still comes up short of SP500.
Everything comes up short of the S&P 500.
Utility companies get local monopolies and in exchange their prices are regulated. Consequently they have moderate but stable, essentially guaranteed, returns.
Why would anyone invest in any other equity other than SP500 if they all come up short (assuming your goal is to have USD in the future)?
Your goal post for acceptable profit taking for utilities is… the S&P 500?
That makes very little sense.
And stock price is not a measure of profit.
If you are choosing to invest in equities for the long term, why is benchmarking against the lowest risk long term equity investment not sensible?
Although, a 5 year investment term is too short for comparing equity returns for a long term investment.
I have literally provided you reports and company names. If you don't like the data, or don't believe the data, reconcile internally. UtilityDive is an industry publication, the financials are public.
I can't address these because most are part of larger orgs, so I am not sure where they are getting their numbers from or how they are constructed. But someone else replied with tickers (including parent companies of the ones you named) and I addressed those.
You haven’t provided the relevant metrics to address their WarmWash’s claim. If the utilities are earning outsized profits, then their shareholders would be earning outsized returns.
Comparing long term returns using a website like this would help figure out if the businesses are over performing.
https://dqydj.com/stock-return-calculator/
Outsized profits does not necessarily mean it flows through to shareholders. That's a management choice. You can be very profitable and not buy back stock or issue dividends.
If you are insinuating corruption, then no discussion can be had since no numbers can be trusted. If there is no (or sufficiently little) corruption, then shareholder returns would be a reflection of the business’s profitability.
Call it what you want, these are unnecessary margins that should be crammed down. Regulation, nationalization, I am not picky how. Whether shareholders are seeing outsized returns from the regulatory capture, also not too concerned about.
I am fairly confident the cohort of those who support investor owned utilities are a vocal minority.
For all the non taxpayer owner utilities I am aware of, the margins and utility prices are completely controlled by government employees. Government employees that are hired by leaders that voters vote for.
Note that there exists the same incentives for publicly owned and investor owned utilities of voters today wanting lower utility prices at the expense of future utility customers by keeping capital expenses down today.
>I am fairly confident the cohort of those who support investor owned utilities are a vocal minority.
I will be the first to support only publicly owned utilities. But that has nothing to do with using bad logic and numbers to determine outsized margins.
Are there many examples of true private ownership? The power utility in my area is investor owned but publicly regulated. They cannot raise rates without approval from a public commission, and I assume are limited in other decisions as well.
In the Georgia (US state, not country) there is one investor owned utility (Georgia Power) that is regulated like you mention by the state. They have to get rates and new plants and basically everything approved by the state Public Service Commission. We'll set aside how the PSC is basically a captured regulatory agency, but in theory they are highly regulated and don't just get to do what they want. GPC serves about little more than half the state's population, and about a quarter of the physical land mass
The rest of the state is served by either local cities with their own utilities or cooperatives. The cooperatives are not government agencies, they are privately owned non-profit corporations whose customers are the owners. These companies aren't regulated by the state PSC and have the ability to set their own rates unilaterally. The only regulation they have is that they report their rates to the PSC, but it's just a report, no approval
Technically they're almost all subject to regulation by the US Government as a condition of taking loans in the 30s/40s (and most of them have rolled that financing over and continue to use it to finance operations even today) but for the most part that regulation just says they have to at least charge enough to cover their interest, and can't sell their systems without the feds' approval
They could raise rates as much as they want, but the structure of a customer-owned company like that is the profits just get redistributed back to the customers, so there's no reason or incentive to do so
And, FWIW, that 23% number from the linked article is about right. GPC is usually 15-20% higher than most of the coops and city-owned systems in Georgia (there are some that are higher). And this is even with some of those coops and cities actually buying power wholesale from GPC
Not only do they have a profit motive, they have a 'Guaranteed Rate of Return'; All this at the citizen's expense.
Rate of return issue, and how the current bond market activity and yield curve plays into this, is covered in https://www.thebignewsletter.com/p/how-the-federal-reserve-s...
As interest rates go up, investor owned utilities increase their rate of return on equity ask, pushing up consumer electricity prices. A baseline of consumer electric demand is inelastic, and required for life.
It's hard to find any sector not impacted deeply by the price of money (US10Y).
But yeah, natural monopolies with inelastic demand (power, water, healthcare, shared infrastructure) should be publicly owned, imo.
The only real proofing of the grid is distributed generation and neighborhood microgrids. Centralized generation with distant distribution is subject to single point failure with widespread impact.
Yeah, they should be like those nonprofit hospitals.....
Which is to say if the solution was that simple and the fruit that low hanging it'd be done already.
At the end of the day whether profit or not the problem is that there's no consequences for sucking and no reward for not sucking. Government agencies tend toward fiefdom expansion, amassing power and graft. For profit entities tend to try and create situations where they can extract rents on the flimsiest of pretexts. They both seem to suck for energy though perhaps government sucks a tiny bit less. Neither "solves" the problem because neither seems inclined to steadily march toward cheaper/better/faster/whatever-er energy. They both seem to try and increase the suck if left to their own devices.
I guess it depends how you fund the system then. If there are not 'profits', how would additional infrastructure and upkeep be done, without just raising rates higher to pay for it? And who would loan them the money? The government? Oh, so back to taxpayers.
How are roads maintained and upgraded?
"Taxpayers" are the public.
The infrastructure is for the public.
Why shouldn't the public get to pay for its own infrastructure without a middleman trying to make a buck?
A middle man that can bail out of consequences for free, while the public can never bail out of obligations and needs. There was something in game theory about such sequential games where one side can only loose if it plays.
Some use a lot more electricity than others (think companies and industries)
Public utilities receive unfair advantages like preferential financing, tax exemptions, and government infrastructure grants in your definition of subsidies, public utilities frequently receive some form of government support. (unfair as in not apples to apples comparison)
> Some use a lot more electricity than others (think companies and industries)
Okay sure, and if the utility is public, the public should get to set policies accordingly.
> Public utilities receive unfair advantages like preferential financing, tax exemptions, and government infrastructure grants in your definition of subsidies, public utilities frequently receive some form of government support
Unfair to who? Somebody who wanted to profit off the public? As a member of said public, excuse me for not being the most empathic towards people trying to make a buck off me.
Huh? Profits are outside capital improvements. That is the nature of profits. There are arguments for private utilities but this one makes no sense.
This feels like kinda of a useless comparison if we don't know about the tax rates they pay, cost of capital, adjusting for geographic location and local regulations etc. I.e. the largest increase was seen in NY where it is really expensive to do anything and high taxes.
Not to mention quality of service. Sure, electricity is electricity. Water is water.
But outages, outage response times, infrastructure, investments, etc. are the other side if the equation.
I have no idea. Maybe investor-owned utilities also provide worse service. However, without accounting for that, the article's claims don't mean much.
> electricity is electricity. Water is water.
except its completely not:
electricity has stability, availability during peak loads, robustness under inclement weather etc.
Water has purity, safety, and flavor. (Austin water in the fall tastes like leaves :gross:)
Agreed! That was sort of my point.
Yup, tax exceptions, cheaper financing or even government financing. It's like letting the referees play the game and then pointing out that they make more free throws.
Removing the rent-seeking middle-man class generally brings in savings. Same with healthcare.
Also the "refs" should be in charge. That is to say the working class are the refs and they should be able to build infrastructure without the capital owning class inserting itself as a rent-seeker between them and these services.
Your free to go start a worker owned company and compete in the market, good luck.
Based on the chart it seems than Maine was by far the highest.
I live in a counter-example. The only water and electric utility available is city-owned and I pay triple the amount of my sister and her family that lives in another city yet has 4+ private utility companies all competing with each other. And she has a house more than twice the size of mine!
Bring on the competition!
How does this system of private competing water companies actually work? Do they each have their own exclusive reservoirs and mains transmission system and water pipes right to their customer's houses/premises? And their own exclusive sewerage systems and treatment plants?
Or are they just reselling access to some ahared legacy infrastructure? In which case any "competition" is very likely an illusion.
The way I understand it in my country is this:
There is only one public water system, every house connects to it. The state tasks specific companies with its maintenance (these are often not utility providers themselves, just construction/maintenance companies).
Consumers attached to that system have a metered connection, but water just flows as long as there's enough overall. Your utilities company doesn't have to move any physical water at all. They just have to eventually "settle" the amount of water that they sold to their customers. They do so by buying and then forwarding options contracts. The electricity and gas companies are the same. They compete on
- trading (who knows best when to buy how much?) and
- consumer-facing marketing
This is how a lot of the modern economy works. Through the power of abstraction, you can run an online store without producing or shipping any items yourself and a delivery restaurant without cooking any meals.
> - trading (who knows best when to buy how much?)
That seems odd. Does a local water futures market exist.
> - consumer-facing marketing
If it's all going through the same pipes, what is there to market.
Electricity is a different story - it can be traded day ahead and even marketed, but none of that makes sense for water delivered over shared infrastructure.
> If it's all going through the same pipes, what is there to market.
They keep coming up with fancy new pricing schemes or random gimmicks to throw in. Nobody really seems to give a shit though.
>4+ private utility companies all competing with each other.
does every house have 4+ water lines, gas lines, etc. running to it?
if not, i'm not sure what you mean.
I imagine this works just like with electricity. You have generation capacity, with commercial entities buying or owning generation capacity and selling the resource to consumers through community owned last mile infrastructure. The sellers need to tally up and reconcile/settle their generated capacity at some frequency (not sure if daily, monthly, yearly).
utilities don't generally "compete" with each other like how most business do - becauase that would mean they own redundant infrastructure. They are more like localized monopolies, because there is usually only 1 that operates for each given address.
What are the two cities? You'd need to control for a lot of factors to figure out if the competition is the reason or the local market rate is just lower.
https://en.wikipedia.org/wiki/Natural_monopoly
And then an icestorm happens and her bill is $2000?
How do you have multiple Water companies compete?
If you say the names of the two cities people can intelligently talk about why this is but it's almost certainly not because it's municipally owned.
Gainesville?
Generally that's not true. Its weird people feel like they must mention any exception. Its the same as "I know someone who lived to their 90s and smoked everyday, so what's wrong with smoking?" People are aware exceptions exist and it doesn't really add anything to conversation to keep bringing them up.
Does your sister live in another state?
Name the city because this makes no sense. You claim private utility companies are actually installing infrastructure? Or are they just resellers that provide nothing?
The only reason cities are having issues with water and electricity is because we cut taxes on the rich. Wages went down and service quality got cut to make the CEOs richer. The US has been coasting on all the infrastructure built in the 50-60s when we had a 90% federal income tax rate and CEOs were capped at making the 2026 equivalent of 5 mil a year. Tax dodging was stopped, everything was funded and life was affordable.
Utilities are one of the cases where market dynamics break down. It's very obvious why, when you realize how difficult it is build even a relatively simple electrical transmission system, or a power plant. The barriers to entry are extremely high.
Furthermore, switching from one provider to another is inherently difficult. There is only one set of pipes leading to your house, how you going to switch to an alternative? Who is going to build the line for the 1 new customer?
And finally, splitting the business across the vertical doesn't work either. Generation of power is tied to grid management, this is tied to transmission maintenance and expansion.
All things considered. Monopoly emerges naturally and rent seeking is pretty much given. There are only two options left. Either the utility is operated by government for common good, or it the monopolist is so heavily regulated and controlled by the government, that it is, in effect, its extension.
That's why most power utilities in the US are considered regulated monopolies. They are owned by shareholders but any changes must be approved by their public utilities commission first.
My electricity is produced by a cooperative. The coop has some 60k participants. And over the year it's managed to build and operate a respectable amount of wind turbines and solar installations, and it's now expanding into district heating and battery storage.
They're producing some 100GWh/year. Which is not half bad, considering they're typically at or below market price and often pay a ~6% dividend.
I think your case is unusual? Co-ops I am familiar with usually don't own generation, they buy power from a regional generator and then provide transmission infrastructure and local services to their (often rural) members.
Maybe with costs for solar dropping more co-ops are looking at adding it at least where it might work to reduce peak demands.
I'm sure it won't work everywhere, but it's been pretty successful. I wish more people would start coops to tackle problems like this. Powering some 50k families is small potatoes in the grand scheme of things, but this started out as a grassroots thing with just a handful of people. Goes to show that you don't have to be stuck with a shitty power company.
One interesting thing I’ve learned is that the utilities will manipulate projects to earn more take. So for example they will add a decommissioning in and then get regulators to approve that and now boom utility co snuck another 1% on the take. The bonuses that the C-suite execs of a public monopoly are getting… unconscionable.
Yup, the capped profit model creates some perverse incentives. I would much prefer they were not private profit seeking entities.
Let me tell you a little story of corruption.
(details are from memory, so let's not quibble and argue over them, my autistic friends)
Back in 1906, after the Big Earthquake happened in SF, the US Congress took pity on the city of SF and built the Hetch Hetchy dam to provide the City with reliable water supply (so the City wouldn't burn down again in the next one). The dam would also generate electricity, and that power came free (except for transmission costs, because the City owned the generation infra). So they started to lay the power lines from Hetch Hetchy to SF.
But, as it just so happened, they ran out of wires and poles just before they could reach SF. So PG&E got the contract to finish off the last mile to the City.
And after it was all over, someone found the missing materials lying in some warehouse, rusting away...
Electricity does not have to cost so much in SF, given that generation is free. And yet we pay over $0.50/KWh in the City.
I really need a source for this story. How did PG&E get wires and poles if the city couldn't get them? Was there a country-wide pole and wire shortage?
I'm all for hating on PG&E but this just sounds like a Reddit-style meme.
OK, found a writeup. Read Tim Redmond's article here: https://48hills.org/2025/12/the-great-pge-debacle-a-timeline...
I was off by a bit. Apparently, the City claimed to have run out of money just short of the finish line.
You can find more articles about PG&E and the Raker Act.
Thank you!
Except AFAIK electricity isn't significantly more expensive in SF than on the Peninsula or anywhere else in the Bay Area that PG&E serves...
Sorry I know its sacrilege to say but i think there's some things the government should simply just own. Water, energy, roads, transit etc.etc.etc... There's no advantages to bringing in private enterprise, at best they merely act as rent seekers, and at worst they strip the infrastructure of all value without any maintenance, getting taxpayers to build it again.
It should not really be controversial. Classic liberal economics (from e.g. John Stuart Mill and on) generally acknowledges that natural monopolies exist and that it's generally beneficial for everyone if they are publicly owned.
It's a really tough, unsolved economic problem.
Just having government run it doesn't solve all the issues, and often adds in opportunities for corruption.
Utilities have to balance investment in infrastructure. We have good reason to move away from carbon heavy sources of electricity, but investing in those new sources and the transmission capacity doesn't just happen for free.
We also need to consider delivering electricity to rural areas, which is usually quite expensive. San Francisco is considering taking over the local utility from PG&E. That might save money for local ratepayers, but would almost certainly make things more expensive for other people in the state who were effectively being subsidized by SF.
Figuring out how to do these things efficiently and balancing multiple goals is not something governments have a great track record of. I think there's a lot of opportunity to construct better market structures to incentivize investment and competition AND keep rates low.
Private utilities typically under spend on infrastructure maintenance and improvement.
So, private owned is more expensive (see article) and under funds the future.
So the only “tough unsolved” part here seems to be that a lot of people have been fooled into thinking private is better.
When we say electricity is a "natural monopoly" what that means in the history of transmission utilities, states have stuck a bargain to grant monopolies in exchange for being tightly regulated, and so there's no version of reality where the state isn't already immersed in regulating them.
Every state in the country has a public utilities commission and they are constantly immersed in complex policy work from implementing legislation to working through an endless docket of cases that fine tune policy to specific tasked out responsibilities like getting a "standard offer". Sure it's complicated but I can't think of any reason that defaults to "don't regulate". We regulate healthcare too, and Medicare is always cheaper than private alternatives.
The problem with leaving private actors to their own devices when they have monopolies is that every conceivable grey area of judgment calls that impacts profitability will be subject to abuses of discretion, such as building out overpriced infrastructure, and investing in cheaper, unreliable transmission infrastructure instead of building for the long term.
> It's a really tough, unsolved economic problem.
It's only tough if your politics is Republican or libertarian, and "privatize everything"
I think “neoliberal” is the word you’re looking for. Centrist democrats are guilty of privatization too.
In Berlin, the left (a party literally called The Left) was leading and eventually implementing an initiative to privatize tens of thousands of city-owned housing units. The same left which has just been elected to re-collectivize those same housing units.
(Tbf when they did the first of these two things, lots of housing units were unpopular and empty.)
> Classic liberal economics (from e.g. John Stuart Mill and on) generally acknowledges that natural monopolies exist and that it's generally beneficial for everyone if they are publicly owned.
The general problem here is that the "natural monopoly" tends to get drawn far too broadly.
For example, people call the telephone network a natural monopoly, which was Ma Bell's argument for making it a monopoly. But which part exactly is the "natural monopoly"? They were telling you what kind of telephone you could use (and requiring you to rent it from them), and tying not just local phone service but long distance service to the use of their last mile lines etc.
Even when they got broken up, the thing that kept the AT&T name was the (solitary, still a monopoly) long distance carrier, as if that was unquestionably still a natural monopoly. Then the internet came and proved otherwise. It turns out if you want to make a connection between New York and Los Angeles, it doesn't matter very much whether it's routed through Houston or Denver or Chicago, and if you have to you can even use a route that goes through Orlando and then Seattle. So transit is a competitive market and "long distance service is a natural monopoly" is BS.
The actual natural monopoly is the trench or utility pole on the road that carries the cable. At worst the cable itself, but installing the pole or digging the trench is way more expensive than adding another cable to an existing one (in the absence of some regulatory capture or inefficient incentives making it otherwise). And it's certainly not the things at either end of it. The other end of the cable that goes to your house should be at a local peering exchange where different companies compete to patch your cable into their equipment.
It's the same for electricity. The natural monopoly is last mile distribution, not generation or even really transmission.
And then if you give a private company a monopoly on something that isn't even a natural monopoly, of course the results are stupid. The thing that causes good results in markets is competition. So what you want in order is competitive market > local government monopoly > private monopoly. But you still don't want the second for any part of the system where you could have the first.
Were you born into a world with electricity naturally occurring in sockets?..
> A natural monopoly is a monopoly in an industry in which high infrastructure costs and other barriers to entry give a market's largest supplier an overwhelming advantage over competitors. An industry is a natural monopoly if a single firm can supply the entire market at a lower long-run average cost than if multiple firms were to operate within it.
https://en.wikipedia.org/wiki/Natural_monopoly
I'm going to assume ignorance rather than snark here.
A natural monopoly is one where a product or service is:
- Widely considered fundamental to the public good (and in most cases, has very inflexible demand, meaning that people will often pay any sum to access it)
- Whose cost overheads are either fixed or grow slower than the variable costs (meaning that the investment required to scale the service not accounting for costs that scale with individual usage benefit from economies of scale)
- Easy to be gamed for profit in the hands of a profit-driven entity (either in the form of extortionate pricing directly, or cost-cutting on things like infrastructure maintenance; a good example here is how PG&E has infamously failed to maintained their power lines in California, leading to large-scale wildfires)
In the modern day, the best example of these are public utilities: water, power, road networks, public transit.
In these cases, the latter two points are used to justify public ownership, which in turn defeats the third point.
I know. The post I was answering to spoke about predatory companies that privatize the air and water of the world we were born into, or similar. Apparently it was edited to read more sober, which is good.
I think you replied to the wrong post, then.
> Were you born into a world with electricity naturally occurring in sockets?
Massive swaths of the US required government action to get telephone and electric service. In many cities/counties, the city or county owns the power utility. In other rural/suburban situations the power utility is a non-profit cooperative that was encouraged/bootstrapped through low interest loans in the 30s and 40s. Telephone universal service was achieved because AT&T agreed to it in exchange for the government allowing it to be a (natural) monopoly
> Massive swaths of the US required government action to get telephone and electric service.
In the UK, British Telecom had plans to roll out what we'd now call "Fibre To The Premises", offering digital communications at maybe as much as 256kbps, multiple telephone lines, and even Video-on-Demand, by the middle of the 1980s across the whole country starting with rural areas.
However, it was smashed up and sold off in bits by the rapacious Conservative government in 1984. Now where I live is on track to get BT fibre - or fibre of any sort really - by 2034.
Telephone and data is an interesting one. It's an area that on its face is a natural monopoly, but in much of the US we ended up with two telecom providers
Telephone was a monopoly because it doesn't make sense to have more than one company string a wire to every house and business. But, all that wire could carry until the 90s was a voice call
Likewise, in the 60s/70s/80s cable TV became a thing but it didn't make sense to have more than one TV wire to every house, because it already has all the TV you can get, and at the time all it could carry was video channels
In the 90s these networks converged: when everything is digital, a network carrying digital signals can carry any kind of data
So, in urbanized and suburban areas we largely have a competitive market in what would otherwise be a natural monopoly. The problem is, because it's competitive in like 80-90% of the country everyone's been relieved of their universal service obligations (which applied only to voice service anyway) so there's been little incentive to expand into more rural and underserved areas
In Sweden there are many cities where the infrastructure (dark fiber to the premises) is publicly owned, but the public infrastructure owner offers no end-user service. Instead, internet service for end users is an open market where everyone uses the public infrastructure. It works really well and is really cheap for the consumers.
> it doesn't make sense to have more than one company string a wire to every house and business.
Not necessarily so. In cities it is quite normal to run 2-4 optic fibers to most buildings; my building in Brooklyn has 2 different fibers and a cable link. Equally, there are 2-3 national mobile providers which cover most of the entire US.
In the suburbia this breaks, or course.
Wireless is much different, one physical piece of infrastructure covers a wide area, vs. wireline requires touching literally every location along the route. The economics are very different
It's why at one point we had 4 satellite TV options in the US at one time (C-Band, Primestar, DirecTV, and Dish Network all existed at the same time) but in 98% of the US there was only ever one cable company (some small cable companies did try to overbuild but it was and is extremely rare) and certainly only ever one landline phone company
And in terms of overall cost for society, is that actually a good thing? It's not like they are actually providing much redundancy. If one breaks (cut during some construction in the street), the other one likely does too. The resources used to put those redundant cables in could have been used better for other things.
I'm always bamboozled by the price of internet connection around the US and that there is a data limit one can upload or download. Perfect example of this milking while making service worse over time.
Other than the very early days of dial-up (where there were monthly limits on connect hours), my internet has always been without limit. Whether some form of dialup (POTS, ISDN, POTS with MLPPP), or DSL, VDSL, DOCSIS, or even LTE: I use what I want and the connection never slows down, and the bill stays the same.
There's an ISP that has completed a buried fiber rollout in my neighborhood as of a few days ago. I'll get plugged into that soon-enough; I got a card in the mail that says it's time to give them a call to schedule an install.
The price has stayed ~about the same over time for broadband; I've always paid about 50 bucks per month for always-on broadband. Sometimes a bit more and sometimes a bit less, but right around 50 bucks anyway. If I were to chart it with an inflation adjustment then the price would be trending downward.
Speeds, meanwhile: They trend upward. Quality of services improves.
A quarter of a century ago, my 860/160kbps DSL used to go down every morning promptly at 0200, stay down for about 10 minutes, and then come back with a different dynamic IP, and I was frequently on the phone with them about some issue or other.
The 500/20Mbps DOCSIS I have today is solid-enough that I can't think of any aspect worthy of complaint, and I've only made one phone call about it in the past 6 years.
I've always lived in the US. Am I doing it wrong?
-
edit: The new fiber provider actually just called me. I signed up for 500/500 fiber for... 50 bucks per month, and they'll install it tomorrow afternoon. The price trend continues.
just about every provider of any significance has dropped data caps in the US. Once fiber hit a critical mass, the cable companies dropped their limits
That's good. I vaguely remember when some isps in US when streaming services introduced basically throttling if you were "streaming video too much". How much do you pay per month? I have an European perspective but I understand that there is much less remote places and far higher competition.
That's now what natural monopolies mean, "natural" alludes to the fact that by nature, only one company will be able to operate and maintain and other companies will be locked out due to barriers of entry or other complications. Look into it
No, but I was born into a world that requires a massive amount of collaboration, specialization, and mutual respect for one another to enable our society.
Natural != occurring in nature in this context
This is a wonderfully uneducated response to the above point.
Go google "natural monopoly" please. No one is arguing that work is not happening to provide a service.
We're arguing that capitalism clearly fails to achieve good outcomes for optimizing the quality and cost of that service in the case of natural monopolies.
Virtually nobody argues that completely free markets should be used for services that are natural monopolies. The actual debate in practice is between rate-regulated private companies, public owned but privately operated companies, and publicly owned and publicly operated companies. There are good and bad examples of all three.
This is what’s called “bad faith”
It's only an anathema to those who want to buy the world we were all born into and rent back the air you breath every day until you die.
There's no reason we should want this for ourselves.
> to those who want to buy the world
Oh, they don't need to buy it, they already inherited from their rich parents. The world is just a set of trading cards to them at this point.
Elon Musk's fake money could buy a new $10 million mansion every single day--every single day--for THREE CENTURIES, and he wants more!
Society is delusional. We can't even collectively agree to tax psychotic money-grubbers who cannot even enjoy the fake wealth they have their names on.
As if the interest on his money wouldn't grow faster than this :) We are stupid :)
Yeah I forgot how we collectively decided that those people with money automatically get more money because they have money.
Did some various calculations and its more $195.0M... per day to spend all his money before he dies.
wait does the math on this work?
welp.You cant differentiate net worth with cash are you ????
people should not take economic take from tech people
To play devils advocate, in NYC which has a massive transit network. There exists a series of private transit "companies" (sometimes just a guy with a 10 person van), that provides routes that are poorly served by the publicly run transit network. The famous Chinatown buses would be another example, that run between Chinatowns in the North East, are incredibly cheap, fast, and are profitable.
They still run on public roads.
I'm all for multiple city bus operators.
This is a great example/argument for how a competitive local ISP market can work. The city/county/state should string fiber to every single house, and then various ISPs can just plug a customer into their particular switch/OLT/splitter.
A common "monopoly" of the physical last mile served by many providers traveling over it
The difficulty is that most of this competitive dynamic is already provided by IP itself (remember when you got your email address from your ISP?), and what remains is basically the physical layer technology which is exactly where the worries lie about stagnation.
There is a small angle where several ISPs can compete around customer service, data caps, equipment rental, business support, price margin, etc. While then forming larger units that put pressure on the physical provider to not stagnate the underlying infrastructure.
On the other hand I've got municipal fiber, and it just works. Great friendly local support (at least from what I understand, I don't really call them), no data caps, the price has stayed fixed for it's whole existence. I don't see any reason to want another layer on top of that, as it would only make all of those things worse.
The incumbent coax provider ("cable compay") still exists. If the municipal fiber provider stagnates on technology, then they could theoretically step up, right?. But given they had been coasting on a monopoly for decades (the other option being DSL), and that their service is still slower than the municipal gigabit (now deployed for a decade), I think that is giving them too much credit! In fact I've seen more talk about next-gen connection speeds from the municipal fiber provider.
For all the marketing about "free market competition", large corpos can be less innovative and responsive than small governments. So for the foreseeable future, I see no reason to not just voice my support for municipal fiber everywhere.
But what about large governments? Japan has amazing internet service, and NTT is mostly private (with the government retaining only 1/3 ownership).
I would trust my county to deliver my fiber internet. All my government services work great. I literally marvel every time I visit our municipal dump, which is cleaner and mode efficient than my home country of Bangladesh. But I wouldn’t trust most of the other counties I’ve lived in before to do it (Baltimore, Wilmington DE, Chicago, etc.).
Given that the argument about municipal fiber centers around a dynamic of large corpos preventing competition from small municipalities (by lobbying for state level prohibitions, etc) that seems besides the point. If a city can't get its own network off the ground, then the whole thing becomes a noop (apart from having wasted the money, which they would have done on something else regardless).
But when cities have the population density to support multiple competing Internet providers with decent physical layers and non-extractionary terms, then there generally doesn't seem to be much of a call for the city to provide its own services in the first place.
Furthermore cities that are incompetent about deploying infrastructure are going to be similarly incompetent at facilitating the permit process for private infrastructure - giving governmentesque incumbent providers a hold over a captive market regardless. So while this is a general problem that deserve its own exploration, it wouldn't seem to have much bearing on Internet access specifically. The real concern is municipalities that would be perfectly capable of providing Internet service (along with the rest of their municipal services), yet are being held back from even trying.
(Also I don't know what the Japan example demonstrates anything because 1. Japan and 2. that 1/3 ownership stake belies a much bigger controlling interest due to being the government)
There's more than just the physical pipe from the distribution point to your house
ISPs could compete on lack of congestion on their backbone, privacy, latency, price, "value add" features (like email, website hosting, etc), and speed depending on the model of the wholesale network
My point is that all of these points of "competition" would merely introduce tradeoffs that are worse than what I currently have.
Congestion/latency/data caps - I've observed no congestion, and have no traffic caps. "Competition" would create differentiation on providing less service.
Privacy - it's a municipal ISP. I'm pretty sure they're not selling my data to the surveillance industry. If it turns out they are, then I have recourse through the local democratic process rather than the standard "tough shit" response from a corpo. Given how the markets for cell service, webapps, etc work I don't have much faith that even in a competitive market, this would end up as a point of competition.
Email / website hosting / etc has nothing to do with the physical connection and therefore already has strong competition across the entire Internet. And actually this applies to the privacy point as well, with VPNs.
The model of the wholesale network is GPON. They obviously didn't string a dedicated fiber from the NOC to each house. So either speed is constrained by the gear the wholesale network buys, or the wholesale network would need to run a bunch of extra home runs so individual provider gets their own home run to light with their own gear.
I could see this last bit being a benefit in 10-20 years when gigabit isn't considered fast enough if the municipal fiber doesn't keep up. But given the municipal fiber built out the gigabit network while the coax incumbent was happy collecting rent on old infrastructure, I'm willing to give them a pass for the foreseeable future.
I agree, bring it on.
You should look up how private buses worked in Chile's capital.
It's not really devil's advocate, it's the way Capitalism should be structured. If we had government covered health care I'd expect private markets of vanity surgery or uncovered procedures to still exist. If we had government run utilities you'd still have private installments for demanding needs, generators, off-grid construction, etc, etc.
then that's not a natural monopoly and not a good example of what is being discussed.
They said transit as a class of natural monopoly and I showed a counter example where there are private companies entering a space where the natural monopoly already exists.
No, you misunderstood the point of the poster and decided to bloviate about unrelated things.
> To play devils advocate, in NYC which has a massive transit network. There exists a series of private transit "companies" (sometimes just a guy with a 10 person van), that provides routes that are poorly served by the publicly run transit network.
Are they part of the regular fare structure?
No, they are typically more impromptu set ups. $5 a person, leaves Queens for Bayonne at 8am, that type of thing. Some have set pick up/ drop off locations like a normal bus. Usually cash only, under the table.
A bus isn’t a natural monopoly. A subway system is.
Tokyo uses privately run subway/train systems and is largely considered the envy of the world with regards to transit. The united states prior to WWII mostly ran on privately run transit systems, with private companies running street car and subway lines. So it does not appear to actually be that much of a natural monopoly.
It is though? Are you gonna open a second unconnected subway system in new York and compete with them? That's always the question for a natural monopoly I thought.
Youre gonna have another company digging a second set of tunnels?
Does it make any sense whatsoever to have two?
> Are you gonna open a second unconnected subway system in new York and compete with them?
Yes thats how it works in Tokyo. They get land, build stations, then dig the tunnels. Their profit comes from fares and rents around the stations that they own.
Right, but they don't directly compete by digging parallel tunnels and routes, because that would be a poor allocation of resources for everyone involved.
Japan is very much an oddball in terms of capitalist nations. They are basically the only highly capitalist nation where corporations still put a high value on delivering high quality services and products at reasonable prices. They haven't yet ran into the vulture capitalist problems every other nation has. There's nothing stopping that from happening other than cultural values AFAIK.
Britain and the US are both good examples where privatization of the rail systems has been a complete mess. The US being the worst public transit rail system of any developed nation.
Not really. Tokyo has an entirely publicly owned subway system. And a separate subway system that was govt owned and then, after buildout, sold some shares to the public via IPO.
With a fare cap to prevent them from screwing over the public.
Or to better apply to the bus example: A bus isn’t a natural monopoly, a city street is.
Hello from Québec! Yes, with the right structure and guardrails in place, you definitely get better costs for citizens and businesses. Citizens can also petition the government when something needs fixing, which is better than "fuck you if you're not a shareholder".
For an example of the opposite, you can unfortunately look at the Canadian telcom oligopoly.
Natural monopolies should always be run by the state.
Consumer choice, or public good/public utility: Choose one.
A deregulated market should provide choice, if it provides monopoly the gov should step in either by breaking up (forcing choice) or making public (forcing good).
there is no consumer choice in a natural monopoly. that's why it's called natural monopoly.
Well, wouldn't it have to become a public good / public utility then? Isn't that what we're all talking about ITT?
I don't think that contradicts what the person you were replying to said. Specifically, they said break it up or make it public. If there is no option to break it up, then making it public is the only option.
I think there's some examples of a split model that work well, i.e. the grid is publicly owned but the retail functions such as metering, billing, and service connections are private and have competitive providers.
> retail functions such as metering, billing, and service connections are private and have competitive providers
I.e., socialize the costs and privatize the profits.
What value can private companies bring to end consumers when they're buying from the same public producer at the same base cost? This is nothing more than a disguised handout.
People on this thread forget that when legislatures cut funding, governments also defer maintenance on the infrastructure; especially since you mention roads and transit: governments tend to underfund both of these. Private companies of course do the same when shareholders demand more profit. It’s the same.
The rest of your point I agree, but good maintenance is not a given regardless of private ownership or government ownership. In fact I would say this is part of being a monopoly: there are no competitors and no market forces to compete on reliability.
> governments also defer maintenance on the infrastructure; especially since you mention roads and transit
Roads are the outliers here because governments usually have direct oversight on them. They are more infrastructure rather than utilities.
Unlike roads, everything else discussed here (electricity, water, sewage, transit), even when public, is operated by a public company, not the government. Maintenance is part of the company's operating costs and is accounted for in the price consumer pays. And while there is no competition for reliability, there's also no obligation to maximize profits for the shareholders.
The difference is that we elect the officials in charge of the roads.
Of course they all like to push off maintenance as long as possible to avoid tax increases, but they will do them. Private industry will literally choose to wait for failure rather than do maintenance because they've discovered things can last longer than expected and they save more money by waiting for a catastrophe (and they can extra more government funds as they "don't have the resources" to fix a problem. See california's PG&E [1]).
The perfect example of this is the train system in the US and the problem we have with derailments. The US has more derailments than basically anyone else and the reason for this is that the rail owners aren't doing maintenance.
[1] https://www.actionnewsnow.com/news/top-stories/is-pg-e-press...
> good maintenance is not a given regardless of private ownership or government ownership.
Its not about maintenance, its about pure math and efficiency.
Natural monopolies have 0 advantage in terms of price discovery, therefore there are no market forces. And you get all the disadvantages of a monopoly without any of the advantages of capitalism.
Many purely capitalist countries still advocate for natural monopolies to be goverment run (Norway oil being public, Singapore owning all the land and housing, Spain having public healthcare) and all of those examples beat countries that have privately owned natural monopolies.
Cleveland has had two sets of power lines for a long time (despite FirstEnergy’s many attempts to shut down Cleveland Public Power). It’s not necessarily a natural monopoly.
Instead it one where incumbents try very hard to convince everyone it must be a monopoly.
> It’s not necessarily a natural monopoly.
Having a private market does not make something not a natural monopoly. Healthcare, education, land, and energy are famously cases where market forces do not find a lowest possible price floor.
the main things that cause a natural monopoly are things like high initial cost, a lower cost per unit created and the most important one a sub-additive cost function.
If you have a single healthcare provider for example and 2 hospitals, you can have 1 IT team to handle both medical records, that is one engineering team, 1 database, 1 security team and then you have the costs that cannot be saved such as doctors nurses and staff in each hospital.
Meanwhile if you have 2 healthcare providers you need 2 engineering teams, 2 dbs, and 2 cyber teams while the cost of doctors, nurses and staff remains untouched.
That added cost makes the "competition" subadditive. You lose more than you gain by having multiple players in the market. Which is why American's spend more in healthcare than single payer systems like the ones in Europe. Just plain old boring math. And its not even a new concept. Adam Smith calls landlords "leeches" in his works
I don't think 1 vs 2 players is meaningful enough difference to make that an actual competitive market.
I'm definitely on board with governments owning stuff - I think the traditional issue has been that government jobs don't attract the best talent (lower pay / whatever). So the types of people that go to government jobs are the ones that like stability and moving slow. That's probably fine - but it has also given them the reputation for being really inefficient.
The natural response is to assume that corporation will be more efficient, and there the consumer will get a better end result. And, again, that was probably true for some period of time. The problem is in a corporate world you need to grow your profits by 3-5% a year (minimum) in order to be considered a "viable" investment. So what happens when your customer base isn't growing at 3-5%? Well you cut costs to improve your profits or you raise prices or both.
End result is the consumer ends up worse off, they got a one-time efficiency gain by switching from government to corporate - but then pay for that over decades.
This was the platform of Katter’s Australian Party.
Instead the Electricity Board got privatised with promises of lower prices. Electric prices tracked inflation and general cpi from when Queensland electrified until privitasation in 1997.
Since then prices have gone up about 75% beyond inflation.
Perhaps it's the rain or I'm still not quite awake this late hour of the morning but I'm somewhat lost with privatisation in Queensland. I'm unfamiliar with something like this being part of Katter's or later the party's platform, a lot of folks like to make fun of Katter but getting down to the hard facts there's more often I find less to disagree with than other political platforms.
I had though though the power is in the hands of companies, they are govt owned [1] [2] I am inclined to say thankfully the power grid up our way is not in the hands of private energy companies or fly by night riff raff - the types that make promises of cheap power but offer up confusing power plans that are actually not that cheap, especially given what I've heard from those unfortunate enough to have been caught that I've chatted to down south. Every so often some grubby fingers try to talk up moves to entice the govt to privatise the energy grid ... something which nearly happened in the 00's.
If prices have risen steeply from the 90s in Queensland, a good guess would be it's due to a need to raise capital to further extend power networks as well as repair / replace a lot of the much older original wooden poles that reached their end of their long life as well as pull out many of the newer poles sourced from where ever, which though they initial passed muster, failed relatively quick.
[1] https://www.energyq.com.au/about-us/who-we-are
[2] https://en.wikipedia.org/wiki/Powerlink_Queensland
My last two energy providers have been coops. In north eastern California, the coop had one feed from PG&E and the other from a company out of Reno (I forget the name). It ended up being cheaper and more stable than PG&E itself.
You really don’t get to choose where your power comes from though and pge owns the lines. Paying another org is just throwing money away.
I will disagree - the coop was actually cheaper than the town near by that was PG&E direct. Also the stability was significantly better than PG&E alone - after the Camp Fire - PGE got extremely paranoid and had frequent shutoffs in the area. The Coop flipped to the backup provider. I think in nearly 9 years of living there, the number of power outages were under 20, the number of extended ones were like 3.
PGE != PG&E btw. The first is Portland General Electric. The second is Pacific Gas and Electricity.
Yeah u was lazy when typing this morning and should have been more complete.
The infrastructure and lines are generally shared, yes.
I'd prefer them to be mostly municipal or collectively owned by multiple municipalities over making them state-owned. Obviously power generation is big enough for it to be state-owned to be a workable choice.
thats the government
Huh. No? There are people elected to work at say EU level, national (country) level, regional level and municipal level. The mix can be different parties and in many places the municipal councils and mayors don't even have to be in a major political party.
You have it similar in US. I bet a mayor can build sewers, collect garbage and build a lot of roads without asking the governor or president.
Or did you conflate government with public sector?
huh? yes? they're all the government
Power generation is easy to be competitive though.
Yes and no. It is until you need to phase out coal or do a nuclear buildout. And it is still critical infrastructure.
And if you underbuild it becomes a problem for the users. And if you overbuild... well, let's assume investors won't let you do that. So, once public sector guarantees demand for decades upfront, it becomes more sensible for it to just have the plant older-built and run it itself.
I get it when there's an obvious natural monopoly, and an alternative is just infeasible to build.
I don't think it applies to electricity in many cases. If there are investors in building new electrical capacity, then it likely means that the area is underserved, and the prices are naturally higher. The government apparently did not build what the market is ready to pay a premium for.
The original Edison's electric company was private, and for-profit. It started selling electricity in 1882. I wonder how soon would a government-owned company manage instead.
That doesn't follow though.
If I am not mistaken, government gives tax breaks or subsidies to induce private firms to enter the market and build capacity.
The only reason investors are building capacity today, is because the demand for data centers is projected to go up.
What happened at the start of electricity, is different from what happened when it was to scale. The nature of the good decides what the most efficient form of production is advisable.
Personally, I would like to see more competition in some of those spaces. But if the government is going to enforce any sort of competitive restrictions, it should go all the way and own it. For electricity, they could own the transmission lines and allow competitors to generate and sell electricity. The government could then charge a fixed monthly fee per connection (based on capacity, so industrial users would pay a lot more than homeowners for their connections).
Private/public matters a lot less than if a system allows competition or not. There are a few infrastructure pieces (e.g. those that cross public land and unowned private property) that make sense to be publicly managed, but probably not as much as one might assume. e.g. Subway tunnels would be much better utilized if they allowed autonomous vehicles to operate in them instead of trains.
It’s not that controversial; usually I end up arguing with people who don’t believe utilities are natural monopolies rather than no government control. They usually point to starlink with the internet and solar + battery on power as incumbents that don’t need public easement. But that easement is too hard to compete with still imo and we ought to just have a public option.
Crazy that we need to keep relearning this over and over again.
It's class warfare. A few billionaires and a bunch of millionaires fighting against the other 99.5% of the world, just so they can be even more wealthy.
Most of the best public infrastructure is state owned but privately operated, like Sweden and Singapore’s transit systems. But the ownership model is less important than other things. Japan’s world leading training infrastructure is privately owned and operated. By contrast, almost all of the United States’s terrible transit systems are publicly owned and operated. Water is a public utility and almost all the United States and the water systems are in terrible disrepair.
The problem with public ownership is that it drives price is too low because it allows people to vote on prices. Your average age 60+ voter doesn’t care if lowering the water bill now means that the system will be in bad repair 30 or 50 years from now.
At the end of the day, there is no magic policy bullet to fix problems with the people. Public infrastructure in the US sucks whether it’s publicly owned or privately owned. But I bet if the Japanese trains were publicly owned instead of privately owned, they would still be pretty good.
My state deregulated natural gas which meant that despite the city owning the delivery and turning on and off the gas each for profit company had to have their own HQ, marketing budget, customer service, sales team, and C-suite.
The fixed service fee cost $40/month which was more than the natural gas consumed every month but Jan/Feb. They also make cancelling difficult, I was put on hold for 40 minutes without an music so I didn't know if I had been disconnected or was just on hold.
Electric is run by one company and their service fee is $15/mo. Their customer service is also much better.
I paid $48 for $0.97 worth of gas last month. About $40 to the public gas company for the hookup, $5.95 in a service fee to the private supplier and the balance tax.
I think at this point, the counter argument to private enterprise is "Hey, China did it".
(I am aware that this is a facetious statement, and the main point you are aiming to make is that there are other factors that matter.)
It’s not a counter-argument for two reasons. First, China doesn’t have voters. The problem with publicly owned utilities specifically is the pressure from voters to lower prices now at the expense of maintenance for the future. Not having voters eliminates that problem. More generally, the lack of voters means that China’s public sector operates completely differently than the public sector in democracies.
Separately, China has been moving more and more of its economy to the private sector for decades, ever since Deng Xiaoping visited Singapore: https://www.fairobserver.com/economics/china-and-its-mentor-....
Do read the second part of my statement, since arguing this further puts me in the awkward position of romanticizing China, which I do not want to do.
I will disagree by stating that China's private sector isn't the same as a western or typical market economy private firm. The degree of state ownership is and central control are hard enough to make comps easy. State support in other ways other than ownership is another topic as well.
I will also say that the Chinese government is receptive to its constituents. Not to the degree that we can expect in a democracy, but its not oblivious either.
There is a lot of writing and philosophy on this exact issue - state owned enterprise, partial to complete deregulation, state operated enterprises, etc.
At the end of the day it will be about tradeoffs. CA/TX and others "deregulated" electricity by splitting the public-side (transmission and distribution) as heavily regulated from the generators and consumer purchasing sides. In TX, nominally, this lowered rates, though it has been some time since I researched this space. What it also did was cause pretty bad second order effects for transmission providers since they can't exclude use of their owned networks due to the physics of grids. It also caused underinvestment in the grid, causing the major freeze-outs and near-collapse of the natural gas delivery pipelines that made the news.
There CAN be advantages to bringing in private enterprise, but, they need fairly strict oversight to not cash out/distribute the funds needed for infrastructure O&M/new build to shareholders.
This is not sacrilege. It is for the common good. Some people, however, would profit off the immiseration of others, by profiting off of charging higher prices for essentials, regardless of the degree to which the buyer can afford the price gouging.
Not controversial at all. Unless you're a purist who believes the state shouldn't own or operate any businesses, the only real advantage of privatization is the potential influx of capital that could be invested in modernizing infrastructure. In today's turbulent world, we're seeing how keeping such infrastructure under state ownership can be not only more practical but also more secure.
Why would it be sacrilege to say that? It seems entirely reasonable.
You are 100% correct.
Agreed, though it's society owning, not government. Practically the same thing, but "government-owned" makes it sound like an adversarial entity and some anti-establishment folks may feel good (or entitled, even) damaging such things. But they then just hurt all of us since it's owned by all of us. (Cf. current protests in France)
Maybe in principle but as practice in many countries show governments suck at planning. We need more electricity everywhere in Western world and governments failed big time even though there were signs hard to ignore - not only compute but also electric cars.
At least make it easy to build powerplants for determined private enterprises to speed-up progress where governments fail.
This argument doesn't really stand up to scrutiny, IMO.
Say you have a section of urban highway that is severely congested. If roads are a profit-center, congestion is a strong market signal--demand outstrips supply! More people want to use your product, but your supply is insufficient. The obvious solution is to build more supply. Until you do, you're leaving money on the table! Quick, expand the road! Build a tunnel! Do something!
The exact opposite logic applies when roads are a public good. They become a cost-center, and any concern about meeting demand becomes subordinate to a thousand other concerns. The costs of building and maintaining roads remain real and immediate (They cost money! NIMBYs hate construction!), but the benefits of building and maintaining roads become abstract and distant (the benefits are: fewer complaints? More economic activity in the long run?) The laws of supply and demand no longer apply, and you find people saying insane things like "Why should we expand that congested highway? Expanding it will only draw more cars, and then it will still be congested!". In a free market, such nonsense is unthinkable. No business would ever say "Demand is so far in excess of supply that increasing supply is pointless!" Yet as soon as market incentives are removed, this nonsense becomes the default.
Every day on my commute, I spend ~30 minutes driving 80 MPH on private highway, and the instant I hit the public highway I am in bumper-to-bumper traffic, as one of the most congested stretches of 4-lane highway in one of the largest cities in the country is reduced to two lanes as it passes under another highway. It costs me 30 minutes of my life every day, and there are no current plans to resolve this bottleneck. The notion that public roads are saving me from evil rent-seeking capitalists is just silly. I prefer self-interested capitalists to incompetent public administrators.
This isn't to say that roads should be totally deregulated--incentives matter, and the state has a legitimate role to play in ensuring that consumers are protected from malicious actors. But the incentives associated with public ownership are so perverse that it's hard to imagine a private option resulting in worse outcomes.
> at worst they strip the infrastructure of all value without any maintenance, getting taxpayers to build it again.
The worst-case scenario for privatization is the default scenario with public ownership!
In this thread: a bunch of comments that don't understand that if you want more of something (power, food, housing, videos of cats, whatever), by far the best way to get it is to give the people providing the stuff more money.
Right.
Giving the government more money to do things works really well. Here in the USA we've given the governments 3x more money in real terms to run our public schools, and we've gotten worse results over those 3 decades.
Governments also get to hide real expenses that audited private enterprises never could. The "cost" on this website assumes what's paid is adequate to manage the business which is wrong.
> Governments also get to hide real expenses that audited private enterprises never could.
You present this as something inherently true, but really there is no reason for this to be the case. We could make it so government entities are significantly more transparent than would be reasonable for a private entity. In practice, that is already the case and what you said really isn't true, though I'm always in favor of more transparency.
Okay, I'll vote for the candidates that will allocate more of my tax money towards these goods and services I want and support.
It's interesting how once people were successfully swindled into privatizing everything, the rhetoric changed from "everything will be cheaper!" to "well of course it's more expensive, you want to reward them for their superior service, right?". Apparently none of these extra costs go to appeasing middlemen or lining investor pockets, all these companies clinging onto natural monopolies are just too good at what they do. They have no conflicts of interest whatsoever!
That only applies to markets. As soon as the market breaks down it no longer applies. Monopolies and cartels for instance can absorb arbitrary amount of money without growing the supply or improving quality.
Hacker News has slowly taken the road to reddit style communism.
Thank you! Holy shit. It is very disheartening hearing from what I see as a intelligent community speaking with such ignorance and naivety.
Texas answers a lot of questions about how well privatization of utilities works (and the answer is often "not very well"). The electric industry in Texas has competitive rates with the rest of the country, but it also has a body count. Putting off repairs and upgrades in order to save money and make investors more money has caused several long outages during extreme weather, including in 2021 when several hundred people froze to death. I have a photo from that year of a thermometer showing 22F (-6C) inside my RV, which I was living in full-time and parked near Dallas, at the time.
And, as a customer, it's a bad experience. I have to switch providers every year, because the rates you get the first year are competitive, and then for the subsequent years they offer much worse rates, 50%-100% higher than the previous year. So, I either have to deal with that annual pain in the ass of picking a new provider and setting up billing, etc., or I pay among the highest rates in the country when the rate spikes. There's also the constant deluge of mailers from competing providers, and gangs of sales people hanging inside Walmart or going door-to-door (I have a "No Soliciting" sign, which is only occasionally respected).
I used to be a free market purist, believing most things would be better with competition, but for a natural monopoly like electricity, it's just forced inefficiency. The law requires the illusion of competition, but the real work of keeping the lights on is done by one entity. All the other power companies are just middlemen, running their own marketing and billing operations, but not doing much else.
I would be very happy to have electricity go back to being publicly-owned and operated, with regulation and oversight.
And, for another data point, the best trash/sewer/water experience is, by far, when the municipality handles all of it and there is a monopoly on those services (even if operated by a private entity). I've lived in places where you subscribed to one of several competing trash pickup providers, and that is always more expensive and provides less (rarely includes regular bulk pickups or recycling in the standard plans, for example). And, you then have loud, smelly, trash trucks rolling through your neighborhood multiple times a week. Admittedly, in those cases, it's often a rural area where picking up is more expensive for the operator due to longer distances, but even in the suburbs it costs more and does less.
Re: garbage collection, I don't think it's just urban/rural. I've never lived in the suburbs, but I've moved around enough to have experienced both public and private collection in both urban and rural settings. In all cases the quality of service was generally much higher for public garbage collection.
And yeah, similar experience for public vs private power and gas companies. A thing that I think many free market purists forget is that local officials tend to live with the knowledge that they will have hell to pay at the next election if they allow the public utilities to start pissing people off too much.
Yeah, in general, city council members are more accountable than a corporation. I can go to a meeting and yell at them. They're also living with the same service, most of the time, so they have a vested interest in making it a high quality experience. It's certainly possible to imagine bribery and other fuckery going on in local government that would make service worse or more expensive than competition, but corruption is historically pretty rare in the US (though it's been on the rise, as permission has been granted from the top). And, competition is an illusion when it comes to utilities; the competitors are all just competing to take a cut, they're not able to compete on service because they aren't actually the provider.
My city has a reputation for corruption. It isn’t great, but also we hold our governments to a higher standard. Behavior that’s worthy of a scandal when a city official does it is just everyday behavior in private businesses.
Surprise!!!
That reminds me, my hometown, the city of Hamburg, bought back the public utilities it had privatized in the 90's, following a public referendum, in 2014.
I recall that one reason was prices for electricity and gas going up after the privatization.
Go figure.
There's a selection bias in the data. Investors chase the highest profit markets.
Public owned ones by definition are allowed to run in a deficit and have alternate source of "charges" in government subsidies.
It turns out that privatization of public services does not yield the lowest prices for consumer as a result of market forces. Because it does not create services markets, it creates services monopolies.
Note that government-owned and investor-owned aren’t the only two options.
I live in Wyoming. We have a member-owned cooperative utility. At the end of the year, it pays every member a dividend. We vote on leadership and major policy. It’s locally responsive but still privately owned; the Governor can’t turn it into a slush fund.
Crazy how cheap the electricity is across the board.
EU average is almost double, 40 cents per kwh
I'm in Alberta, Canada where energy is (at least for now!) cheap and plentiful. I'm with a community-owned energy marketer and pay 6 cents per kwh, and just of $3 per GJ. If we paid anywhere near your rates the seperation referendum would have turned out differently!
Alberta is one of the more expensive provinces for electricity, and the average is around 20 cents per kwh as of March 2026 according to federal government:
https://www.cer-rec.gc.ca/en/data-analysis/energy-markets/ma...
Which also has this quote: "In Alberta, where electricity is supplied through a competitive retail market, residential prices tend to be slightly higher and more variable over time compared with most other provinces."
6 cents per kwh! Can we set up some shipping back and forth for batteries, you charge them, I pay you for it and can have cheaper energy.
This is about what we pay here for delivery back to the grid, yes pay, not earn, they don't want our solar, we have too much (yes we can turn them off, and we do).
Isn't power production and rates a provincial concern?
Why in the world would the cost of electricity be a factor in wanting to separate federally by anyone with the slightest amount of brain tissue?
Thanks natural gas and fracking
I wonder how much higher electricity costs would be without natural gas, fracking and nuclear.
Nobody forced Germany to shut down their nuclear plants. The US even warned them not to do it for over a decade. Obama and Merkel had a joint press conference where Merkel assured everyone that Germany had a "10 to 15-year plan". The Biden administration even sanctioned German companies building Nordstream 2 because it was a Russian geopolitical project that would be weaponized against them.
Well we see how that turned out.
Merkel's lack of brain or personal folder in Moscow archives forced Germany. It often hard to tell with Germans if it's their stupidity due to arrogance (they in many ways never grew out of their pre world war two self image as the most developed mentally, morally and technologically nation in whole Europe) or their corruption.
One culture thing I learned moving from an impoverished rural community to San Francisco was how little time the affluent spend on the necessities: cooking, cleaning, laundry, home improvement, shopping, etc.
Most of my free time was spent on the necessities.
Moving to SF and embracing that lifestyle (being able to afford that lifestyle...) freed me up for the pursuit of happiness.
I look at government the same way: public service should assume some of the burdens for the citizenry. utilities should be one of those things assumed by the state, paid for by taxes. The administration of which has a goal of driving down costs for customers, NOT for increasing profit
Salaries across the board are also a non-insignificant factor. Not just CEO but for brevity,
Seattle City Light CEO $340k 8% bonus
Bonneville Power Administration CEO $245k
Avista Energy CEO $4.77 Million
Puget Sound Energy CEO $1.7 Million up to 9 Million (includes bonus ramp targets)
Now let’s play a game of which are public and which are private.
We have "utilities on the market" now. So we get to choose between the color of logo on the invoice. Every year we can switch around new year. Then lots of marketing is going on: people going door to door as well...
For sure I now pay for all these marketing campaigns: they all offer a cheap first year. So I have to switch yearly to get a good "welcome present" (that the non-switchers are paying for me).
Privatizing a commodity-service, that utilities are (electrons/water/gas -- it's all very standardized) is the most ridiculous to me. The innovation a supplier can bring you is mostly it's marketing campaign.
Sure, because you’re also paying for public utilities in other ways (taxes, inflation, regulations, etc). The government can’t give you anything it hasn’t first taken from you in one way or another.
Cost in this example is simply rate paid on your electric bill, but with the government - essentially unaudited - the bill isn't the real price. The assumptions everyone's making are just lazy.
What are you guys complaining about? "17.8¢ a kilowatt-hour at investor-owned utilities" ?? Here in San Francisco we're paying close to 50¢ a kilowatt-hour!!
Our local co-op electric utility may have a lower rate than other states, but their policies are entirely profit based. No grid-tie. No off-peak rates. Customer experience is terrible. Internal company spending reminds me of the current decor at 1600 Pennsylvania ave. And my share in the company last year, after being a customer for nearly four decades paid me $15.
Still better than PG&E I imagine.
I am also a counter example... My utilities are now half of what they were than when I lived in an area provided by a public utility.. (BPU.. looking at you)
I think the problem in the machine is "investors" as they have primarily a capital based value evaluation.
Nothing else has value to them apart from capital and its "profitable" usage, so the fundamental reason why corporations even exist, to collectively bring about real world value takes a back seat.
Yes, utility privatisation in the UK has been terrible for the consumer (and environment) too.
The real problem is the incentives. Since privately owned electric companies are monopolies, they usually have some sort of utility board that has to sign off on the rates, and usually this is through some sort of "reasonable" profit margin or return on capital. Therefore, the only way for a private utility to make more money is to spend more money. It's a complete inversion of normal capitalism.
In California for example, PG&E has an incentive to propose the most costly projects, make the worst deals with the union, etc. Of course the union is also very happy with this and will provide political cover for PG&E. Every extra dollar they spend on capital is an extra 10 cents every year they can charge the ratepayers and then pass on to shareholders.
You obviously see the result here where it's not just the profit margin of the private utilities that's causing the higher cost. Even if you zeroed out their profits and reduced rates accordingly, you'd still be paying more, because the private utilities spend more. So much for privatization saving money.
The fact that co-ops are even cheaper than private utilities is doubly crazy since most co-ops are rural, and the amount of wire to serve each customer is way higher than private utilities which tend to serve cities more where it's cheaper to provide service.
IMO the solution would be to make profits based on some sort of quality/cost of service benchmark rather than just expenditures. The problem of course is that it's hard to make fair metrics that aren't gameable.
A good lunch time (33 mins) watch on how private utilities set their prices and make money + the history of private utilities.
https://youtu.be/3fDGcZ8qpPM
That's why essential utility or otherwise operator that functions essentially for the common good / people must be in public or public-private hands with strong regulation on what is allowed and what isn't.
Should it be investors owned monopoly have higher charges for electricity?
There are definitely price downsides to having to pay corporation tax.
This is a slop website selling a product.
It does not appear to adjust for any of the things that matter. Taxes, cost of capital, generation mix, etc. I think the “insight” is impossible to call an insight with the lack of real modeling.
I find that every single time these arguments are flawed, and don't account for a whole host of things.
What's the cost of capital on public providers? And on private providers?
What's the energy mix for each of them?
Are both providers profitable? How profitable are each of them?
Are there subsidies involved? Either directly or indirectly via lower than required fee increases due to political pressure.
Frankly it's tiring to always see the same flawed arguments here.
Some of your questions read to me more like explanatory factors than confounding variables. If cost of capital is lower for public utilities, great, that’s an argument in favor.
I actually think the most interesting factor is listed down in the “about the data” section: “ Most of the gap opened from 2020 to 2023, during the energy price spike: 25% at investor-owned utilities, 11% at public utilities and co-ops. Before and since, both rose at about the same pace.”
So, it might be basically the same story everyone complains about. When there’s a shock, companies tend to quickly hike prices higher than they need to, but after the problem is resolved they’re slow to let prices come down again, if they do at all.
And that detail casts doubt on other explanations because if they were the case we wouldn’t expect to see the divergence be largely confined to the pandemic. There was still a gap before 2020, but it looks like it had been a fairly steady ~1¢/KWh.
Ok so show us a non-flawed argument because from where I sit I’m getting raked on utilities by a private corp.
Turns out energy is getting more expensive, especially when places like the US aren't diversifying their energy and are relying on dead dino juice.
That doesn't explain how Silicon valley powered, owned by the city of Santa Clara, can provide electricity at 18c/kwh while the next city over PG&E charges 48c/kwh
Has Santa Clara diversified their energy and Sunnyvale did not?
Where’s that guy who always posts about all the solar in Texas when you need him!
That's generation
How do you explain increases in the cost of distribution?
Additionally the regulations between the two are not the same.
For example, in my home state of Massachusetts, for-profit utilities are required to participate in the state mandated home efficiency subsidy program, MassSave and add surcharges to the delivery charge, to a state-wide cost of $4.5 billion for 2025 - 2027.
Municipal utilities are exempt.
We’re at the bottom of the list on this post, because it’s looking at recent inflation, but municipal utilities cost much less in Mass. But there are many components to this difference.
How much more is needed to get people to put the effing phone down and pay attention to what's happening.
The vet for my cats, charges 450$ for spending 5 minutes checking the cat, 2 vaccines and out... then I ask.. are you part of a investor owned or equity owned.. they answer yes...
Do you want me to tell you about health insurance?
Why is people not angry? the "100$ er visit" option of health insurance is always 1400$ of "itemized" things...
Oh yeah... iphones are kind of cheap...
Wait a sec, were... but the rest of the electronics are cheap right? even if we will never be able to own a home?
Rammagedon? what do you mean the ps5 is 1k$? do you remember when 300$ where insane?
I always like to point out that Nebraska is the only state in the US that has 100% public electricity.
It is naive to think that the government can just be 23% more efficient at getting you electricity. This excludes account for tax exceptions, cheaper financing or even government financing. The government is a monopoly and not allowing competitors in with legislation and using tax dollars to be more "efficient".
The referee should not be able to play the game.
"Efficient"? Nobody believes that the sourcing is more efficient. It's the profit-margin which the government doesn't need which makes the difference, they can be significantly less efficient and still beat "investors" who have shareholders to pay.
I meant "Efficient" as in delivering the power for less cost. Investors don't necessarily care about a profit margin either. Space X is a trillion dollar company and has 0 profit.
Having Musk run a country was partially tried for a bit.
It didn’t go that well.
Its naive to think that removing the rent-seeking middle-man class won't lead to savings. Same with private healthcare costs vs more socialized or single-payer systems.
rent seeking middleman? I would say the government has the most special privileges of the competitors in the market no?
We have the most expensive healthcare in the world and some of the worse it is a over regulated industry full of complexity and corruption. Look at industries without government involvement, the less involvement the cheaper and better things get.
healthcare, education, and child care all suck.
tvs, software, and clothes, all cheap and very good.
I love this chart: https://external-content.duckduckgo.com/iu/?u=https%3A%2F%2F...
Are you claiming that a cheaper bill is actually more expensive, even when you have an example in front of you?
that means "23%" profit for the people who dropped capital for potential returns.
I have worked as an engineer is private and public power utilities and there is not a significant difference in how efficiently things get done. All human orgs are basically the same, when you get down to the people actually doing the work. Private utilities have all the security of a public utility so the 'profit margin' is not really an everyday focus at the worker bees level in the way that it is in actual private industry.
Having seen the sausage being made in both, I would say that private utilities are very little for the additional $$$ they extra t for shareholders. I would just as soon see all power production and transmission nationalized.
What was the hypothesis here, did we think they would be charging less?
I remember when water was privatized in Brisbane, Australia - instantly noticing the jump in my bill. It's clear that privatizing infrastructure like water & electricity doesn't benefit consumers (unless they are somehow investors). I understand that Amsterdam is privatizing water as well. But what can be done about this? Is the only path as consumers is to become ruthless capitalists for our own survival? I wonder where this cycle ends?
It can be stopped by voters making smart decisions during elections.
Whether that happens, is up to the electorate.
https://www.stepchange.show/grid Good pod on utilities.
There are not-for-profile municipal utility operators in California. They form NCPA (Northern California Power Agency), the largest stake holder is SVP (Silicon Valley Power) a.k.a. The City of Santa Clara.
Something a lot of transplants don't learn for years: Palo Alto, Santa Clara, and Alameda are members of NCPA, so you don't pay PG&E, amusingly PG&E pays NCPA for access to its hydro and geothermal.
One of the reasons I left academia: in a different context my colleagues would all know to shout "correlation not causation!", "conditioning on a collider", and "no true control group!"
But if they saw this they'd immediately like, subscribe, and share broadly with positive commentary.
Thanks Capt. Obvious
You voted for this.
Privatization of utilities was always bad idea. We had a lot of it in Poland, mostly driven by "govt owning it is communism, we want to get away from what" and it just made it near universally worse
Natural monopolies are always the first suggestions to keep public owned. And you can't have 2 water suppliers piping into your apartment from the source
You can. It is just that the costs of pipes (wires) are so high that you can't both charge a reasonable price and pay for the pipes. This is why most farms are on private wells - $10k to drill a well is cheaper over 50 years than pipes to each farm. (Many Iowa farms are on public water not a well because wells in those parts tend to not produce enough water for a house's need - and they pay a lot of money per month to pay for those pipes)
This is why we say utilities are a natural monopoly. If you have the pipes/wires in place and even a little paid off you can undercut and competitor until they are bankrupt.
Even if there is only one set of pipes under the street, the owner of those pipes is constrained from acting in a predatory way if the market is free. They are disciplined by potential competition (if prices too high or lets the water quality drop, it suddenly becomes financially viable for a competitor to dig a rival pipe, or set up localized system, or offering water trucking to your site).
Under a government-granted monopoly, that threat is legally banned (except for maybe water trucking)
You are correct, but only at unrealistic levels of bad. A potential competitor risks that they lower the prices after the have dug in the pipes and that is enough that the competitor is bankrupt. Even if water quality is the issue, it is easier and cheaper for the incumbent to fix the issue than for you to dig in new pipes. Only in the case where the incumbent has worn out pipes that all need to be replaced at once (unlikely - pipes last a long time and we have had good success relining pipes in many cases: leaving only a minority that need expensive replacement at any one time).
Because the bad has to be unrealistically bad before someone can compete nobody sane will.
>only at unrealistic levels of bad
Bad water or water service is not unrealistic.
It took FIVE YEARS for Flint Michigan's water to be re-declared "safe to drink without a filter." The solution involved FEMA and the National Guard.
That can't have been the best way.
Even if allowed it would take more than 5 years for a private company to put in enough pipes to compete in Flint.
It would not take 5 years for a competing interest to complete a takeover bid of the water utility and implement faster/better fixes. Nor would it take 5 years for water customers (if they could) to divert the money that funds the municipal water district away from them and towards an alternative like water filtration or truck deliveries
It would take five years to complete all that. We'd certainly hope that they can manage your project better and get it started sooner than that but there is a lot of labor and there's only so many crews can do it and so many so much equipment. Your competing water utility could certainly serve the first customers in two or three years, but there's a lot of work needed and I would be surprised if they could get the whole town done in even five years.
Yeah nah, nobody getting entirely new pipes dug up under the infrastructure that's already on top of it to save few cents per litre. If you're big water using industry it might make sense but for anything residential it doesn't
Government granted monopolies are granted under oversight and regulation that would be extreme in any other scenario. Many of them don't even get to set prices. No discipline or market forces needed. The regulators just regulate predatory action.
In your example no one is going to dig a rival pipe because you can't just go around installing pipes under other people's roads and land. The permission to do that is granted to a single entity by the government, further reinforcing the natural monopoly. There is no situation where it is economically feasible to lay more pipe when you have no right to do that.
Right, I'd rather lose 15% of cost to waste/inefficiency than increase cost by 25% to put money in someone's pocket.
This guy thinks waste in government is only 15%.
At the low end, the GAO estimates of federal spending, 3-7% is fraud, 3% is improper payments, 7-10%+ is legal but wasteful (e.g. zombie programs) - totaling 13-20%.
In the middle, DOGE (don't smite me, just citing multiple sources) estimated 30-33% was waste.
And at the high end, the American public according to Gallup polling perceives 59% to be waste. https://www.cato.org/blog/americans-say-federal-govt-wastes-...
NEE profit margin is currently 40.37% https://www.macrotrends.net/stocks/charts/NEE/nextera-energy...
From that, NEE pays 43.72% in dividends.
So we can say that 17.64% of the amount paid for energy to this company is wasted in dividends ALONE.
Just to put some numbers on the waste on the private side.
Accounting earnings are not simply the markup on electricity, or revenue collected from electric customers minus the cost of supplying them. NEE's financials include many other things such as investment earnings, gains from the sale of assets, energy futures and tax credits
Private companies also have waste. And in industries where they have effective monopoly on the market the waste isn't really capped by competition too
Is this a serious take? Citations from DOGE and American perception?
DOGE isn't a source so don't cite them. They just made shit up.
The American public is stupid and wrong and their perception is not useful here. They will believe the government wastes 50% of every dollar because they have been told that, even though it's just stupidly wrong.
The GAO is actually the only information you provided. They are trustworthy and happy to be critical of every administration, and they don't get enough love for their important work.
I don't know if you realize this, but 3-7% literal fraud is actually a pretty good number for a very complicated system. 15% "waste" where it's hard to even define what "waste" is is also a good number.
Visa and Mastercard accept far higher for a far simpler fraud profile.
Also you said "This guy thinks waste in government is only 15%" and then the only data you provided has to wave many hands to get up to 13-20%. What the hell man?
Privatization supporters seem to always use waste as a boogeyman, but never the inevitable profitmaxxing for management and shareholders.
Utilities have made $200B+ in profit since 2021, new report says - https://www.utilitydive.com/news/utilities-have-made-200b-in... - March 17th, 2026
That's $200B that could've, in some parts, gone into grid investment and lower electrical costs. Instead, it's the rake for financially engineering being a middleman.
I'm confident this is solved for in the long term with more coop and muni ownership of grids, alongside rapid deployment of solar and batteries so folks can go off grid if they want, as is happening across Pakistan [1] [2]; in the interim, it's annoying though, and for those who cannot afford to be squeezed for these profits, painful.
[1] https://news.ycombinator.com/item?id=46070915
[2] https://news.ycombinator.com/item?id=50145248
(non profit, coop, and muni grids can go to the bond market just like an investor owned utility to borrow for grid investment capital, so this is not an excuse for investor owned utilities to exist)
https://www.electric.coop/electric-cooperative-fact-sheet | https://www.electric.coop/wp-content/uploads/2026/09/2026_NC... [pdf version]
> Privatization supporters seem to always use waste as a boogeyman, but never the inevitable profitmaxxing for management and shareholders
That’s because under capitalism, waste and inefficiency are touted as the ultimate evil. Making profit is the entire purpose of the whole system, so it’s inherently good, and “the right thing”.
Especially in the US, even talking about a reduction in profit is akin to blasphemy, and quickly gets one labeled a quack.
It's unfortunate, for sure. Luckily, clean tech manufacturing and deployment will eventually outpace the ability to capture energy for returns [1] [2]. China currently has enough solar PV manufacturing capacity for double current global demand, and battery manufacturing capacity is catching up. Prices will keep coming down, and eventually everyone who wants to go off the grid and has space for batteries and solar should be able to.
Just like China is cramming down legacy auto export TAM through their EV exports (BYD has surpassed Ford in international sales as of this year, as is constrained by not having enough marine vessels to export more), solar and batteries will come for investor owned utilities as well.
[1] https://ember-energy.org/data/china-cleantech-exports-data-e...
[2] https://www.iea.org/reports/solar-pv-global-supply-chains/ex...
Without a doubt you are right.
My comment was about a lot more than just utilities. Healthcare, education, transit, etc etc.
Now look at how much they invested in keeping the infrastructure up to date. The ones I know about are very good at the rent seeking portion but when it comes to (preventive) maintenance and capacity planning they are terrible.
The private sector is more efficient, yes, but only at extracting value.
Blasphemy, the invisible hand of the market is supposed to ..... somehow lower prices.
Remove PGE from the numbers and I bet it's a lot closer.
Do we also have a study on the quality of service provided by investor-owned vs public providers?
I mean, both sides claim to have the better quality, so let's see who actually has it.
Whaaaa? When you run something with the goal of making a profit that ends up costing more than when you run it without the goal of making profit? Hows that possible?
Is anyone surprised by the profit motive?
Some research suggests that clustering simply on public vs private is correlation not causation. Many public utilities in the USA are clustered around hydro electric system and dense urban system whilst private utilities pick up the more expensive to run and traditionally less well serviced markets.
We have more than enough experience to know that privatising infrastructure is often a terrible move as far as consumers are concerned. Yet we still fall for the lie of 'private efficiency'.
The truth is that the efficiency argument is just a fig leaf for the true ideological motivation to sell off publicly owned assets. The true reason is at the core of neoliberalism and it is essentially to increase investment opportunities for people with capital. Nothing (not even childcare) can be provided by people for people. It must be offered up to 'the market'.
The argument for private industry was never that they would always charge lower prices per unit, but that they would produce things more efficiently--at a lower cost per unit. Of course public providers can charge lower prices. Their sales revenues aren't their only source of funds! So the mere fact that they charge lower prices doesn't necessarily indicate lower total cost, since the low prices may simply be a subsidy which is shorn up with tax dollars.
A case in point would be the Mamdani stores that are being launched in New York City. They'll be offering groceries at a steep discount. Socialist activists could then turn around and write headlines like "private-owned grocery stores charge x% more for groceries than public providers", but would that mean that public groceries have overall lower costs than private ones? Obviously not. It would be foolish to use price data to argue that the public model is somehow better than the private one. You would need to know whether the point-of-sale savings represent actual savings to the consumer, or whether the difference is being paid in some other way.
It doesn't do consumers any good to pay $50 less their utility bill if that $50 savings is made possible by charging an additional $60 in state and local taxes.
Alternate headline: "Public utilities subsidize 19% of electricity charges."
It's not even that though. Looks like public utilities are only offered in areas where those utilities are cheap to provide or abundant, and private utilities fill in a gap in harder to reach areas.
The study even points this out as a foot-note but then focuses on rate of price increase versus nominal price. It should not come as a surprise that in areas where utilities are less abundant the price will increase faster than in areas where that same utility is plentiful.
That’s roughly the opposite of the development of electric utilities in the US. The IOUs owned dense urban areas and refused to electrify further out. It was only the rise of public municipal utilities that got them to go to the states, implement the regulatory compact, be granted rate of return, etc., and then they began building out more.
That is the historic situation yes. However it doesn't change how things are today. the municipal utilities that remain have lower costs because they don't have the more expensive structures.
Or "investor owned utilities pay out c-level bonuses and dividends equal to 23% of actual costs"
Some of it goes to bonuses and dividends, but 23% is a really big number.
I think a big part of that number is risk, dividends are tied to risk too.
The very idea of investing is that you take risks in exchange for profits. That is, if it fails, you lose your capital, if it succeeds, you become richer. A public provider doesn't work the same way, risk is covered by taxpayer money. If it fails, taxpayers foot the bill, if it succeeds, cheaper service.
NEE profit margin is currently 40.37% https://www.macrotrends.net/stocks/charts/NEE/nextera-energy...
From that, NEE pays 43.72% in dividends.
If we multiply these two numbers, we end up at 17.64% in dividends ALONE.
23% is not a really big number by a long shot.
NEE isn't a pure utility, they are a hybrid of two businesses. Their Florida Power & Light (FPL) subsidiary is a regulated utility which the state government caps ROEs of at 10.95%.
Their other subsidiary is NextEra Energy Resources, which is not a regulated utility, and has 60% net margins. This business is basically an unregulated competitive wind and solar developer. They take full risk if they can't sell their power, but can build wherever they think there are customers willing to pay. 35% of their power is sold straight to industrial customers at private contracted prices, the rest into the grid.
Alternate headline: "Profit-seeking organizations seek profit"
Right.
Governments don't have profits. In the last 30 years, they've all racked up massive amounts of debt. What do we call what the guys who run our government make since they only have debt (and not profits to speak of ...).