I don’t know about the rest of you. But where I live (Detroit), the electric company is privately owned. And there is only one statewide.
Why isn’t that considered a corporate monopoly? Sure I could move to another state. But it isn’t that way with other things. I don’t have to go to another state to buy another food product or service.
What gives? Why isn’t it considered a monopoly? Ma Bell certainly was.
:):)
I don’t know how it works in Michigan, but in Maine, there are two parts to this. The grid operators are monopolies governed by the Public Utilities Commision, but the power generation is not a monopoly. You will get a bill from the same grid operator no matter who you choose as your supplier, but you do have options. There is also a default option called the “standard offer”, which will appear on your bill unless you decide to choose a different supplier.
It is a monopoly but subject to the Board of Public Utilities in most states. They cannot raise prices without permission of a government organization.
There are many reasons for this, but in many states you can buy your power from different suppliers though the distribution is still from the main old company.
Other options are to go off grid with some mix of solar, wind & generator.
It has to do more with the history of how everything was developed, than anything else.
The reason why we generally DON’T want monopolies, is because of how horribly the monopolies we used to have, behaved back in the 19th century, and how badly we still see monopolies behave elsewhere in the world today. That is, we know that FREE MARKET monopolies, tend to ignore all sorts of desirable behaviors, simply because they can, and because they aren’t directly profitable. Things like worker safety, pollution, functional useful products, and reasonably profit margins.
We also know that SOME functions wont be performed well, if everything is divided up between competing systems.
Historically, it was private companies who got into the business of supplying energy, before governments could or would opt to take on the task themselves. So what we sort of stumblingly decided to do, was to have HEAVILY REGULATED monopolies in some circumstances. Of course, it’s not a perfect solution.
The craze of “privatizing” has been VERY unfortunate. Especially because it has been pushed forward by people who believe in MAGIC. That is, the people who most strenuously push to have everything be the result of competing privately owned companies, never examine either the factual history of everything, or the details of what private competition actually consists of. Instead, they take as an article of faith alone, the idea that ANYTHING done by private profit centers is going to be “good,” and anything done by government is going to be “bad.”
I have seen that it is almost invariably true, that doing anything because you think it is MAGIC, leads to almost entirely negative consequences.
I have no idea what any of this is supposed to mean, but the deregulation of many industries that previously operated as regulated monopolies has been enormously beneficial to the consumer. Communications and air travel are examples. In other cases, it hasn’t worked so well.
Because you can’t build houses and hotels on it?
See, your mind went straight to the game–mine went straight to “Hey, you guys!”
Not sure Air Travel is a great example. It is cheap but it is now a borderline torture for said cheap fares.
I don’t like flying (though didn’t like it much better back in the regulated days which I do remember). However you have to quantify the effects I think. Air travel is a lot, not a little, cheaper relatively than it was. And if the public really wanted premium service for a premium price, they’d pay, which some people do. Much complaint about air travel, insofar as the part the airlines provide*, is complaining why can’t we have a better product at the low price we’re willing to pay? Re-regulation per se would not solve that problem of popular/political desire to get something for nothing.
Back on the topic, under past and current technology you can’t practically provide electricity distribution on a competitive basis, the grid operator has to be a regulated monopoly. You can inject some competition into electricity generation, as is the case now in many areas of the US, but it’s complicated and limited in effect.
*a lot of the PITA of flying is stuff the airline don’t directly provide, like the security hassle and ATC system limitations. The security hassle, which didn’t exist on anything like the current scale decades ago, is not a product of deregulation. It’s either really necessary or not as a debate nothing to do with regulation. Privatizing some of the TSA function might improve things a little. The ATC limit is indirectly a function of deregulation because relatively cheaper flying has increased demand growth in the same airways. Privatization is more likely there (as other countries already have, ones generally considered ‘left’ of the US) and will probably help. But the crowding issue basically gets back to what people are willing to pay themselves, v. seeking the political escape hatch of a solution where somebody else pays, which is how some people implicitly see ‘regulation’, as tapping into that vein of OPM.
What is the OP suggesting? That monopolies are illegal and aren’t supposed to exist?
Monopolies are not illegal. When they exist, government has the right to break them up, but that’s not mandatory, nor is it always desirable or even possible. It really wouldn’t be feasible for a new company to enter the electricity market in New York and compete with Con Edison- the startup coders would be insanely high.
So, typically governments allow utilities to act as monopolies, but regulate them heavily.
Contrary to the popular understanding, it is generally not illegal simply to be a monopoly. There are anti-competitive practices one can use to become or sustain a monopoly that are illegal (Standard Oil) or to extend a monopoly into a different market (Microsoft). A public utility is typically established by law and constrained in its business activities, however.
I thought utilities were called ‘local monopolies’ or ‘regional monopolies’ or something like that. Allowable for practical reasons. I wonder about National Grid though, they’re not just local.
A good example is California. In Northern California the main power supplier is PG&E. And they use to be the main power producer. So Calif. sort of deregulated. I say sort of because they just changed the regulations. The Idea was more power producers were allowed into the marked competition and the free market would drive prices down. PG&E was forced to sell any and all power plants that they could to private companies. And they did. Go past a former PG&E power plant and many no longer say PG&E but many now have the sign out saying Duke Power Production. Having the plants in private hands did not drive prices down. The rule of supply and demand is still in effect. Prices have gone up every year. And Duke is not a “utility” and is unregulated so they can increase their price with out any public hearings just board meetings. And another factor for the public. PG&E could not find buyers for their more expensive power plants, older and nuclear. And they lost the plants that were making them money to make up for operating the other plants at a loss. And the CPUC is making PG&E jump through large hoops to close plants they are loosing money operating. At one time having stock in PG&E yielded dividends every year and now most investors advisors will not recommend PG&E. This according to friends who work for PG&E and some investor advisors that I knew.
Mine straddled both.
As has been mentioned above, under the old scheme, the government (state or county) tells a utility, "You can have exclusive rights to distribute power in this area. In return we will pretty much tell you what the rates are, but we guarantee you a profit (typically in the region of 5%). Here in Arizona the overseers are elected but there are only a handful of them so corruption is always possible; I don’t know how other states select their commissions.
The new game in town are folks who buy their power wholesale then sell it to you, but even if you opt for them, you still have to pay a distribution charge to whoever it is that owns the wires to your house which chews into the savings pretty well. Here in Mesa, the power is supplied by the city so I don’t have the option anyway. The per-kilowatt charge is about a third higher than when I was buying my juice from Salt River Project.* I don’t know what the city is doing with the extra money.
With that 5% or so return, utility stocks and bonds are popular with investors as they are considered pretty bankrupt proof, but not always. Years ago I had a co-worker who was heavily into investing and had the Wall Street Journal delivered to work so he could read it over lunch. One day he paused, started laughing and, knowing I dabbled in investing, called me over. “C’mere; you’ll appreciate this.” It was a tombstone ad for an offering of WPPSS bonds.
“What are they, grade D?”
“There is no grade D.”
“There is now.”
*The ‘APS’ yellow spots are for Arizona Public Service, the other big provider in the state.
A bit of history here. In the late 19th century, electric companies, telephone companies, trolley companies, etc. weren’t regulated. Entrepreneurs went into a market as soon as they had money and equipment. Property owners might refuse the company a right-of-way, which cut their neighbors off from getting service. In some cities, competing power companies put up separate poles and cross-crossed lines everywhere. Some of those power lines were safer and better maintained than others. Sometimes Westinghouse might build its own lines, and refuse to sell generators to a potential competitor.
The power companies themselves battled over AC vs. DC and what frequency to transmit the power.
Of course, being entrepreneurial enterprises, some of them were underfinanced, went broke, and stranded their customers. Eventually local and state governments stepped in, granted geographic monopolies and standardized services and rates.
An informative read on this is The Age of Edison by Ernest Freeberg.
Try to imagine a situation in which there 2, 5, 10,… power companies, each of which had its own poles, wires, transformers, etc. all built at enormous expense. Do you think the pubic would be better off. There are just some things that a natural monopolies, although usually heavily regulated. I remember contrasting the telephone system of the US, in which even in the 1960s you could get service on 24 hours notice with that in Switzerland, operated by a government monopoly. My wife and I moved into an apartment in Zurich in 1967 that already had a telephone installed, along with all the wiring. All it took to install service was flipping a switch. But it took six weeks to get them to flip that switch.
With the emergence of power markets (google the initials MISO, PJM, SPP, ERCOT) your “monopoly” utility was forced to restructure their operating methods to allow outside agencies to bid and offer into their wholesale markets.
They may appear to be a sole producer/supplier but the generating plants of those companies are under the direction of regional indifferent power schedulers.
So the utility may own generation, transmission, distribution, and customers they are not allowed to oversee the actual minute by minute operation of their generation nor their transmission. They bid their transmission into the market seasonally and their generation into the market hourly (day ahead).
They use not only their own facilities to serve the customer they can also buy and sell power and transmission from regional players. It’s somewhat similar to a stock market. The producers sell into the grid at the hourly market price and the customer owners buy at that price.
I stated this all much simpler than actual but in the long run its turned local utilities into competitive players instead of the old standard where the customer had to pay for expensive “home grown” generation.
Bubbadog
Who makes a living trading in power markets
You’re right that that’s a problem.
Almost any start-up where the coders are all insanely high will produce really bad software. Which will make their start-up an epic fail instead of the next hot IPO or Alphabet acquisition. Better to keep them away from the serious drugs. 
I agree with you that some examples of shifting from regulated monopolies to less regulated private competition has worked. That supports what I was trying to get at, which is that decisions about such things that are made for functional and entirely logical reasons, can be a good idea. It is the self-blinded support for privatization which I take issue with.
I don’t agree all that much with your examples. Air travel was never a regulated monopoly, so it has nothing to do with the discussion. The only part of communications which was once a regulated monopoly, was the phone company. Disassembling AT&T was not entirely “beneficial to the consumer.” We are paying more for phone connectivity than ever before. But it certainly was a good idea, in that I suspect that we would not have had the benefit of a great number of alternative communication systems, had the Phone Company continued to control all of it.
As an aside, Cleveland actually doesn’t have an electric monopoly. The distribution infrastructure is owned by two different competing companies, First Energy (AKA The Illuminating Company, AKA Cleveland Electric Illuminating, AKA CEI) and Cleveland Public Power (AKA CPP, AKA Municipal Light and Power, AKA Muny). Any given building is hooked up to one or the other (plus, of course, like everywhere else we have a choice of suppliers). I’m pretty sure it’s also possible to change from one to the other without moving, but it’s likely to carry some very stiff installation fees, too high for typical residential customers.
Ironically, our football stadium, First Energy Stadium, is supplied by CPP.