By Joel A. Harrison, PhD, MPH / East County Magazine / Feb. 17, 2012
“If we had free market competition, SDG&E would have to absorb the costs of the fire. Quite simply, if they raised their rates, consumers would switch to other providers.”
Sempra-owned utility San Diego Gas & Electric wants “San Diego-area utility customers to pay for nearly all of an estimated $463 million in cost not covered by insurance from the catastrophic 2007 wildfires that were triggered in large part by its power lines,” the San Diego Union-Tribune reported. “At stake is who ultimately pays for the fire’s destruction — ratepayers or shareholders.” SDG&E wants the ratepayers to cover 95 to 100 percent of excess wildfire and related litigation costs.
Twelve years ago, California deregulated utility and energy companies based on the promise that free market forces, i.e. competition, would lead to an expansion of available energy, better quality service, and lower prices–the age-old mantra of free-market advocates. Instead we saw exponentially increasing costs with industry contrived rolling brown-outs and black-outs. We saw the greed of an unregulated industry almost single-handedly destroy the economy of an entire State. Finally, the State partially re-regulated by giving authority to the California Public Utility Commission to oversee rate increases.
If we had free market competition, SDG&E would have to absorb the costs of the fire. Quite simply, if they raised their rates, consumers would switch to other providers. But there are no other providers. SDG&E is essentially a monopoly. If there was market competition, then to stay in business, SDG&E would have to absorb the costs, not the consumers. We aren’t talking about SDG&E going bankrupt, just several years where their stockholders would have to do without dividends or, at least, much lower ones, and their CEO and other overpaid management would have to suffer cuts in earnings. Share prices would probably also go down; but, if run well, after the fire costs were paid off, would increase again.
We’ve seen the bank bailouts and people are outraged. Market economics says that companies should benefit from the profits gained when they do things right; but should suffer the consequences when they screw up. What we now have is free market profits and socialized losses. Whether it is through taxes or through higher rates to consumers, we don’t have anything remotely resembling the free-market except in the disingenuous inflated rhetoric of those seeking the bailouts and their well-funded right-wing think tanks.
This isn’t the first time I’ve written about SDG&E. In two previous Op Eds on this site I wrote how they tried to charge me $1,599 to move my gas meter from under my bedroom window just a few feet so I could replace the window with a door. Thanks to the help of the California Public Utility Commission (which did not have legal authority to intervene but moral suasion), I received a refund of $800 and a detailed invoice which included a charge of $760 to dispose of nine feet of pipe. I pointed out that the Miramar Landfill, 15 minutes drive, takes pipe with asbestos for free (my pipe turned out to not have asbestos) and it was SDG&E’s pipe. They wanted to charge me for removing their own pipe!
Since their rules don’t allow anyone else to touch their gas meters, SDG&E obviously was using their monopoly status to price-gouge. My plumber would have done the entire job for $500 or less, so it still cost me, after CPUC’s intervention, $300 more than in a free competitive market (Reader’s Editorial: Price Gouging by SDG&E—Results of Deregulating a Monopoly, October 1, 2010, Reader’s Editorial: Price Gouging by SDG&E—Results of Deregulating a Monopoly: A Partial Victory, November 16, 2010).
During the energy crisis of 12 years ago, several California cities/counties did not suffer rolling brown-outs or black-outs and did not see catastrophic rate increases. Among these were Los Angeles and Sacramento, both publicly owned utilities. In fact, Los Angeles actually made money exporting electricity and Sacramento’s Public Utility has been given JD Powers highest rating for consumer satisfaction. Neither charges higher rates than SDG&E. Any “profits” go to schools, fire and police departments, road maintenance, etc. rather than to bloated CEO salaries and stockholder dividends.
SDG&E’s current attempt to burden consumers with increased utility costs, especially given the current economic difficulties people are having, is one more blatant example of corporate power and greed. When times are good they reap the benefits and when times are bad nothing changes. In standard Economics 101 there are two choices, either market competition or regulated monopolies. If monopolies aren’t regulated they extract profits in excess of what competition would allow. It is high time we re-regulate our PUBLIC UTILITIES, put the PUBLIC back into force. In the meantime, SDG&E should have to absorb the costs of the fire just as they would if there was a competitive market!
Joel A. Harrison, PhD, MPH, a native San Diegan, is a semi-retired epidemiologist. He has worked in the areas of preventive medicine, infectious diseases, medical outcomes research, and evidence-based clinical practice guidelines. He is currently active in supporting the adoption of a single-payer health care system in the U.S. For more information on single-payer go to Physicians for a National Health Program’s website at www.pnhp.org