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Because the equilibrium point for the natural monopoly is worse than that for the chartered monopoly, both for the company and the region it serves. For the co
by roughly 3y ago
Because the equilibrium point for the natural monopoly is worse than that for the chartered monopoly, both for the company and the region it serves.
For the company, the natural monopoly state still has them having to negotiate rights of way, etc, in a way that raises overall cost and complexity of provisioning the service.
For the region, the natural monopoly state leaves outlying and areas less economical to serve less well served and leads to higher rates, because, monopoly.
So, a chartered monopoly allows the company to operate at lower cost and less uncertainty and allows the region to enforce both quality and quantity of service as well as have some control over rates.
- willcipriano 3y agoHow would a competitor even get established if economies of scale provide such a large advantage? The only way that would work is it the current power company has very wide margins.
- roughly 3y agoI encourage you to go back and re-read my previous posts, paying attention in particular to what is asked of the company granted the monopoly in exchange for the charter. To refresh, the companies are obligated to take on less and potentially uneconomical customers, and to provide them services at rates below what the market would ordinarily demand. This is done as a social good. This puts the chartered monopoly at a potential disadvantage to competitors without a similar obligation, who are not required to bear the cost of provisioning service to those customers or can pick their markets more carefully. Once again, the natural monopoly state is less service to fewer customers at a higher price.
- willcipriano 3y agoSo update that regulation to a version that assumes competition. Force power companies to deliver power to a percentage of the unprofitable customers roughly proportionate to their total market share of the profitable customers. Could also force the encumbant to rent unprofitable customers at their cost to upstarts to make it easier for them, sort of like carbon credits.
- roughly 3y agoAlternatively, we could recognize the incredible amount of effort we’re putting into trying to make the profit motive be sufficiently aligned with our wants and the paltry results of even those Herculean efforts and recognize that this might be one of those places where a market solution is a poor fit. “With sufficient thrust, pigs fly just fine.”
- willcipriano 3y agoThis isn't really a incredible effort. It's mostly not doing things, namely enforcement of the monopoly that allows this large surplus to exist.