No Way to Put the Public Back in Public Utilities?

Several years ago many state legislatures embraced the concept that technological innovations would stimulate robust competition in previously monopolized industries such as electricity, gas and telecommunications. The legislatures so bought into the certainty of competition that laws created a glide path to deregulation and the near complete elimination of consumer safeguards. The legislature accepted the premise of lobbyists and sponsored academic researchers that public utilities should qualify for treatment as competitive businesses surely entitled to cut off services to nonpaying customers, an outcome that has contributed to 81 deaths in Pennsylvania. See http://www.centredaily.com/329/story/1026815.html.

With the passage of time, it has become quite clear that infrastructure industries with substantial investment needs do not typically have many facilities-based competitors, especially for the last mile of service to residential and small business consumers. Yet most state legislatures have not revise their laws, even after the Enron debacle showed how crafty public utility employees could exploit their less regulated status to create expensive, but artificial bottlenecks, congestion and shortages of power.

Having cut a deal based on the certain expectation of competition, state legislatures did not think to condition deregulation on confirmation that the competition arrived and flourished. Without such a safeguard, deregulated public utilities surely will claim that they relied on the promise of deregulation and any revision would unfairly and unlawfully confiscate their financial resources. So public utility consumers in many states have the worst of all worlds: deregulation based on competition that did not arrive and apparently no remedy for resumption of consumer safeguards in the absence of a self-regulating marketplace.