Who benefits from utility regulation?

A new technical whizbang called E-911 was being introduced by the phone company.  It was baloney, the senator told me.  E-911 was going to be a new way for emergency responders to know exactly where a phone call was coming from.  When a call came to a 911 call center, a message would pop up automatically showing the phone number, which could then be linked to an address.

This was 1991 or so. The phone company, US West in those days, was asking the state for approval to add 50 cents to everyone’s phone bill to cover the cost. The senator told me the technology had been developed anyway, and the 50 cents was pure profit to the phone company.  The increase was approved.

Caller-ID was introduced shortly afterwards, making the technology available to everyone (for a much heftier price than 50 cents). But E-911 succeeded in squeezing more money out of you and me.

The phone company’s lobbyists were the nicest guys in Santa Fe.  They were pleasant, friendly, cheerful, the sort of guys you would hate to disappoint by voting against their bill.  They even had a traveling liquor supply.  When somebody hosted a party for legislators during the interim, away from Santa Fe, the phone company’s junior guy would show up with a carton containing a generous selection of liquor.  The next day he would pick up the leftovers for the next party.  A few years later he was a cabinet secretary.

(During legislative sessions, in that period, a vice president of PNM was the cold cuts guy, regularly delivering a grocery bag full of sandwich makings to the House Majority Leader’s private office refrigerator.)

The principle behind the regulation of public utilities is that when government protects a private business from competition by granting it monopoly status, that business is accountable to consumers, through their government, for the quality of its service and for reasonable cost.

I have long suspected that public utilities, regulated monopolies and companies that are almost monopolies – big companies with lots of captive customers – are increasingly taking advantage of those customers by squeezing extra dollars out of them, often in the form of numerous small add-on fees that customers don’t understand and can’t fight.  Look at your phone bill and see if you understand what every item is for.  There is an argument that they are no longer monopolies because of competition from cell phone companies, satellite TV and so on; but I have been suspicious of that.

Someone has figured it out.  In a new book called “The Fine Print,” investigative reporter David Cay Johnston explains in detail how some of them do it, including how lawmakers and regulators are either bamboozled by the complexity of the issues or co-opted by being hired later by the companies they regulated.   I am a big fan of Johnston’s previous books, which should be required reading for legislators and regulators.

In New Mexico, the structure for utility regulation is set by legislation, and then regulatory decisions are made by the Public Regulation Commission.  In 2013,  because of the constitutional amendment we passed, the legislature is supposed to enact legislation establishing qualifications for PRC candidates.

We need future commissioners to have the analytical skills to understand the issues in utility regulation and the backbone to resist the blandishments of the utility lobbyists, no matter how nice they are. Perhaps the new law could include some conflict-of-interest prevention, such as a requirement that any PRC commissioner, and the commissioner’s immediate family, are barred from working for or consulting for any regulated utility, or any company affiliated with a regulated utility, for a minimum of 10 years.

Triple Spaced Again, © New Mexico News Services 2012



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