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If that much meat is left on the bone for a commodity like electricity that indicates to me the market isn't robust enough and we need to lower barriers to entr

If that much meat is left on the bone for a commodity like electricity that indicates to me the market isn't robust enough and we need to lower barriers to entry and increase competition.

forgetfreeman 3y ago
Or we could eliminate profit motive entirely and go back to treating power generation like the public good it is.
- 93po 3y ago
  Internet too, please
conradev 3y ago
Texas and Massachusetts have markets where you can choose your own retail electricity provider. The REP is responsible for purchasing/providing the power. Both systems sit on top of regulated monopolies who own the underlying wires, though. This Maine utility fight is primarily over who owns the wires, not who owns the generation.
- WeylandYutani 3y ago
  The US was electrified a hundred years ago with government grants. Especially in a place as rural as Maine.
lmm 3y ago
Electricity grids are literally a textbook example of a natural monopoly.
- willcipriano 3y ago
  I question how a public utility can be viable where a private one can't. In theory similar market forces should apply to both, and commodity prices should be close to the cost of production so the prices offered under competition should be close. Why can't we let private companies do whatever we were going to let the public one do? Frankly rather than the hack of setting up a public utility I'd perfer straight up price controls, no reason to build out alternative infrastructure at taxpayer expense, but there might be a quicker fix with some modifications to a few regulations. Still this is better than nothing, just feels overly complicated.
  - lmm 3y ago
    > I question how a public utility can be viable where a private one can't. In theory similar market forces should apply to both, and commodity prices should be close to the cost of production so the prices offered under competition should be close. Natural monopoly means there is no (or at least insufficient) competition. So either you get accountability by having it be publicly-run, or you end up with very little accountability at all. > Why can't we let private companies do whatever we were going to let the public one do? Private companies are very good at coming up with things you never thought of in order to make a profit - that's the whole reason private industry can be more efficient than public ones in the first place. But when most of the creative things they could come up with would be profiting at the expense of the public (because in a monopoly position there's essentially no incentive to treat consumers well), the profit motive does more harm than good and it's better to take it out of the picture. > Frankly rather than the hack of setting up a public utility I'd perfer straight up price controls, no reason to build out alternative infrastructure at taxpayer expense, but there might be a quicker fix with some modifications to a few regulations. That's how you get loopholes that then get exploited worse than the problem you were originally trying to fix.
  - ThrowawayTestr 3y ago
    > I question how a public utility can be viable where a private one can't. The lack of need to make a profit for one thing
  - ffgjgf1 3y ago
    > I'd perfer straight up price controls EU is a good case study. Countries which abandoned price controls but instead have a single (usually state owned) company which controls the grid and a bunch of companies which sell power to consumers (effectively renting the grid) tend to have lower prices than those that didn’t. e.g. I can get a plan which is: Wholesale hourly market price + €0.08 fee to the grid company + €0.02 to the power company.
    - cool_dude85 3y ago
      No offense but in what world would a residential customer want exposure to wholesale electric market fluctuations. Like what's the appeal.
kristopolous 3y ago
If you're willing to have government intervention and regulation to enforce a free market then why not just remove the "landlords" here and go with public ownership to take them out of the cut entirely? Remember the established assumption here is regulation and intervention is required to enforce the thing. Any argument based on the allergy to public sovereignty over public goods is not applicable. Public governance is intimately involved in either solution
- willcipriano 3y ago
  Its probably regulation that is making the market not free enough. For power they are often granted explicit monopolies. The straightforward solution to "the guys we gave a monopoly to are charging too much" is not letting them have a monopoly anymore.
  - roughly 3y ago
    Two notes on this: The first is that barrier to entry for power companies is that they're enormously expensive to set up - they're huge up-front capital costs with extremely low per-unit costs. This is, as several others have pointed out, the textbook scenario for natural monopolies, in which left to its own course, one company will capture the entire market. The second is that typically the reason a power company is then granted an explicit monopoly is because there's a social need to deliver power to places that are more expensive to provide to than the civic center, and usually the monopoly is provided with stipulations that the company must deliver power to these areas. This is for two reasons - the first is otherwise nobody, no matter how much competition is in the market, is going to deliver power to those areas, because it's fundamentally uneconomical, and the second is that the company that does try to provide power to those areas will be undercut by the company that isn't. A chartered monopoly in this case is to work around the fact that the market _does not work_ for provisioning these goods - left to its own devices, the market would not provide power to many distant rural areas. The basic conflict here is between a social good with diffuse benefits - electrification in rural areas is generally considered a net positive for productivity, health, society, etc., and pride of place, but it's deeply uneconomical on a unit basis, and so the market solution does not deliver here. Sometimes the math says the market's the best choice, sometimes it does not. For large-scale provision of high capital cost goods across a geographically distributed area of variable population density, the math says the market doesn't work out.
Turskarama 3y ago
Markets don't work well for power distribution because there's fundamentally a natural monopoly. Unless you think we should allow each distribution company to run their own set of power lines down your street?
- ffgjgf1 3y ago
  There is no reason why you can have a single public (state owned) company which owns and maintains the wire and a bunch of companies which generate/buy and sell power to consumers effectively renting these wires.
  - Turskarama 3y ago
    It makes somewhat more sense for generators than distributors but it's still a difficult situation because almost every form of generation has strict requirements (often government mandated) on where they can be built. Then with the distributors who actually sell to the public: the service they are providing here is really dubious. Ultimately they are just buying power at wholesale prices and reselling it to the public at some average price + markup. What can they actually do to increase customer service? They are essentially just a middleman. At least where I live it effectively makes no difference which one you go with, some might temporarily have better rates but they inevitably need to get back in line with everyone else or go bankrupt.
    - ffgjgf1 3y ago
      > some might temporarily have better rates but they inevitably need to get back in line with everyone else or go bankrupt. That how “perfect” competition works. All of them are forced to maximize efficiency and minimize prices because they have no way to differentiate themselves. I would not necessarily trust all public monopolies to do the same.
0xbadcafebee 3y ago
It is very hard to lower the barrier enough to make it profitable to become an energy provider, either for generation or distribution. You have to already have a favorable market position, like easy access to capital, a huge workforce, expertise, relationships in politics and business, land, infrastructure, etc. That's why they're mostly monopolies, and the only competition is in weird middle-men that use financial trickery to resell energy. It is honestly really dumb to allow utilities to be private. You waste money paying huge bonuses to CEOs who fail to lower costs or improve service, and then pay out much more from civic coffers when said shit service sets half the country on fire. Regulating and running national infrastructure for the common good is basically what government was created to do, after waging war, regulating commerce, and settling disputes between goat farmers.
- ffgjgf1 3y ago
  You can just split infrastructure into a separate company which does not sell power itself. That what the EU forced almost everyone to do. Basically you end up with a publicly owned monopoly which owns the power lines and a bunch of companies which basically make their money from hedging. The outcome is that countries which adopted the model tend to have lower energy prices than those that didn’t and have it’s a government regulated monopoly (more or less) like Poland. In theory having a lot of participants competing on equal terms should result in higher efficiency longterm.
  - cool_dude85 3y ago
    What you're describing is called "deregulation" in the US. This is what the post you're replying to means when it says "weird middle-men that use financial trickery to resell energy". An unflattering but not unfair way to describe the companies who sell complicated plans direct to residential customers.
    - ffgjgf1 3y ago
      If you have multiple of these companies competing on even playing field you should be able to get very close to what considered to be “perfect competition” at least in theory (with some regulation).

If that much meat is left on the bone for a commodity like electricity that indicates to me the market isn't robust enough and we need to lower barriers to entry and increase competition.

forgetfreeman 3y ago

Or we could eliminate profit motive entirely and go back to treating power generation like the public good it is.

93po 3y ago
Internet too, please

conradev 3y ago

Texas and Massachusetts have markets where you can choose your own retail electricity provider. The REP is responsible for purchasing/providing the power. Both systems sit on top of regulated monopolies who own the underlying wires, though. This Maine utility fight is primarily over who owns the wires, not who owns the generation.

WeylandYutani 3y ago
The US was electrified a hundred years ago with government grants. Especially in a place as rural as Maine.

lmm 3y ago

Electricity grids are literally a textbook example of a natural monopoly.

willcipriano 3y ago
I question how a public utility can be viable where a private one can't. In theory similar market forces should apply to both, and commodity prices should be close to the cost of production so the prices offered under competition should be close. Why can't we let private companies do whatever we were going to let the public one do? Frankly rather than the hack of setting up a public utility I'd perfer straight up price controls, no reason to build out alternative infrastructure at taxpayer expense, but there might be a quicker fix with some modifications to a few regulations. Still this is better than nothing, just feels overly complicated.
- lmm 3y ago
  > I question how a public utility can be viable where a private one can't. In theory similar market forces should apply to both, and commodity prices should be close to the cost of production so the prices offered under competition should be close. Natural monopoly means there is no (or at least insufficient) competition. So either you get accountability by having it be publicly-run, or you end up with very little accountability at all. > Why can't we let private companies do whatever we were going to let the public one do? Private companies are very good at coming up with things you never thought of in order to make a profit - that's the whole reason private industry can be more efficient than public ones in the first place. But when most of the creative things they could come up with would be profiting at the expense of the public (because in a monopoly position there's essentially no incentive to treat consumers well), the profit motive does more harm than good and it's better to take it out of the picture. > Frankly rather than the hack of setting up a public utility I'd perfer straight up price controls, no reason to build out alternative infrastructure at taxpayer expense, but there might be a quicker fix with some modifications to a few regulations. That's how you get loopholes that then get exploited worse than the problem you were originally trying to fix.
- ThrowawayTestr 3y ago
  > I question how a public utility can be viable where a private one can't. The lack of need to make a profit for one thing
- ffgjgf1 3y ago
  > I'd perfer straight up price controls EU is a good case study. Countries which abandoned price controls but instead have a single (usually state owned) company which controls the grid and a bunch of companies which sell power to consumers (effectively renting the grid) tend to have lower prices than those that didn’t. e.g. I can get a plan which is: Wholesale hourly market price + €0.08 fee to the grid company + €0.02 to the power company.
  - cool_dude85 3y ago
    No offense but in what world would a residential customer want exposure to wholesale electric market fluctuations. Like what's the appeal.

kristopolous 3y ago

If you're willing to have government intervention and regulation to enforce a free market then why not just remove the "landlords" here and go with public ownership to take them out of the cut entirely? Remember the established assumption here is regulation and intervention is required to enforce the thing. Any argument based on the allergy to public sovereignty over public goods is not applicable. Public governance is intimately involved in either solution

willcipriano 3y ago
Its probably regulation that is making the market not free enough. For power they are often granted explicit monopolies. The straightforward solution to "the guys we gave a monopoly to are charging too much" is not letting them have a monopoly anymore.
- roughly 3y ago
  Two notes on this: The first is that barrier to entry for power companies is that they're enormously expensive to set up - they're huge up-front capital costs with extremely low per-unit costs. This is, as several others have pointed out, the textbook scenario for natural monopolies, in which left to its own course, one company will capture the entire market. The second is that typically the reason a power company is then granted an explicit monopoly is because there's a social need to deliver power to places that are more expensive to provide to than the civic center, and usually the monopoly is provided with stipulations that the company must deliver power to these areas. This is for two reasons - the first is otherwise nobody, no matter how much competition is in the market, is going to deliver power to those areas, because it's fundamentally uneconomical, and the second is that the company that does try to provide power to those areas will be undercut by the company that isn't. A chartered monopoly in this case is to work around the fact that the market _does not work_ for provisioning these goods - left to its own devices, the market would not provide power to many distant rural areas. The basic conflict here is between a social good with diffuse benefits - electrification in rural areas is generally considered a net positive for productivity, health, society, etc., and pride of place, but it's deeply uneconomical on a unit basis, and so the market solution does not deliver here. Sometimes the math says the market's the best choice, sometimes it does not. For large-scale provision of high capital cost goods across a geographically distributed area of variable population density, the math says the market doesn't work out.

Turskarama 3y ago

Markets don't work well for power distribution because there's fundamentally a natural monopoly. Unless you think we should allow each distribution company to run their own set of power lines down your street?

ffgjgf1 3y ago
There is no reason why you can have a single public (state owned) company which owns and maintains the wire and a bunch of companies which generate/buy and sell power to consumers effectively renting these wires.
- Turskarama 3y ago
  It makes somewhat more sense for generators than distributors but it's still a difficult situation because almost every form of generation has strict requirements (often government mandated) on where they can be built. Then with the distributors who actually sell to the public: the service they are providing here is really dubious. Ultimately they are just buying power at wholesale prices and reselling it to the public at some average price + markup. What can they actually do to increase customer service? They are essentially just a middleman. At least where I live it effectively makes no difference which one you go with, some might temporarily have better rates but they inevitably need to get back in line with everyone else or go bankrupt.
  - ffgjgf1 3y ago
    > some might temporarily have better rates but they inevitably need to get back in line with everyone else or go bankrupt. That how “perfect” competition works. All of them are forced to maximize efficiency and minimize prices because they have no way to differentiate themselves. I would not necessarily trust all public monopolies to do the same.

0xbadcafebee 3y ago

It is very hard to lower the barrier enough to make it profitable to become an energy provider, either for generation or distribution. You have to already have a favorable market position, like easy access to capital, a huge workforce, expertise, relationships in politics and business, land, infrastructure, etc. That's why they're mostly monopolies, and the only competition is in weird middle-men that use financial trickery to resell energy. It is honestly really dumb to allow utilities to be private. You waste money paying huge bonuses to CEOs who fail to lower costs or improve service, and then pay out much more from civic coffers when said shit service sets half the country on fire. Regulating and running national infrastructure for the common good is basically what government was created to do, after waging war, regulating commerce, and settling disputes between goat farmers.

ffgjgf1 3y ago
You can just split infrastructure into a separate company which does not sell power itself. That what the EU forced almost everyone to do. Basically you end up with a publicly owned monopoly which owns the power lines and a bunch of companies which basically make their money from hedging. The outcome is that countries which adopted the model tend to have lower energy prices than those that didn’t and have it’s a government regulated monopoly (more or less) like Poland. In theory having a lot of participants competing on equal terms should result in higher efficiency longterm.
- cool_dude85 3y ago
  What you're describing is called "deregulation" in the US. This is what the post you're replying to means when it says "weird middle-men that use financial trickery to resell energy". An unflattering but not unfair way to describe the companies who sell complicated plans direct to residential customers.
  - ffgjgf1 3y ago
    If you have multiple of these companies competing on even playing field you should be able to get very close to what considered to be “perfect competition” at least in theory (with some regulation).