NaturalMonopolyOnPipesDebbie Mayfield has brought attention to the way the Florida Municipal Power Authority is ripping off Floridians and does a great job of identifying part problem but not so much on the fix.

Mayfield begins by noting that some privileged entities get special monopoly designations from government. She doesn’t really seem to have a problem with forcing Floridians into monopoly providers and eliminating market choice.

Fortunately, much of our state is served by utilities that are comparatively reliable and low in cost. The state’s five investor-owned electric utilities are regulated by the Public Service Commission, which monitors the service they provide and cap the profit they can earn in exchange for assigning them local “monopoly” territories. Some people might complain about their local utility for one reason or another — there’s no doubt that some do a better job than others — but all things considered, Florida’s regulated system is keeping the lights on for millions of Floridians.

It has nothing to do with consumers paying their bills and demanding electricity for all of the electronic devices in the modern household. No all the credit to you have power is to the regulators that have granted monopoly privilege and criminalized competition. Millions of people demanding electricity and without government we’d all be in the dark.

Unfortunately, the system is potentially leaving hundreds of thousands of Floridians in the proverbial dark — those served by one of the roughly 35 municipally owned utilities across Florida that are not subject to PSC scrutiny. They provide the same essential service as investor-owned utilities and maintain the same type of monopoly territories, but they fly under the radar of regulation, quietly protected by outdated statutes.

Mayfield goes on to say that some monopolies are better than others judged by their price levels. Mayfield abandons the market and instead glorifies how great things can be when you serfs don’t have a choice.

In many cities, municipally owned utilities do a great job at a good price. The Orlando Utilities Commission, for example, is a model municipal utility. Its success likely reflects a combination of good management, responsible local oversight and, as one of largest utilities in Florida, economies of scale.

Mayfield gets back on track by identifying the problems of municipal-owned monopolies. Sorta.

In many cities, municipally owned utilities do a great job at a good price. The Orlando Utilities Commission, for example, is a model municipal utility. Its success reflects likely a combination of good management, responsible local oversight and, as one of largest utilities in Florida, economies of scale

It should be noted that there can be no monopoly without government. Government force is required to ban competitors from entering a market and have monopoly status. Without government granting privileges utility providers would compete for your business which would really bring about better service and lower prices.

This is best highlighted by examining FMPA which combines the problems of monopoly and government agencies into one big disaster.

FMPA’s high costs have helped drive local electric rates through the roof. And despite local residents voting overwhelmingly in favor of selling the local utility to reduce rates, FMPA is single-handedly standing in the way. To protect its monopoly, FMPA is blocking the sale, effectively forcing Indian River County residents to pay rates that are 30 percent higher than neighboring areas.

Mayfield then pinpoints three problems with the FMPA that make it a “monopolistic dictatorship.”

There is often no way for cities to extract themselves from FMPA’s legally binding contracts

Mayfield says it is incorrect for city governments to be tied to monopolies yet ok for individuals to be subjected to monopoly due to contract between  government and company. It seems the problem is that the city officials can’t choose which company should get monopoly privilege. Not that individuals are forced to patronize whoever receives monopoly privilege.

Mayfield points out the second problem.

there is very little transparency in FMPA’s prices.

Consumers do not care about price transparency but rather the prices themselves. Competition between companies drives prices down benefiting consumers but monopolies are shielded from competition thanks to privileges handed out by government. It is not the price transparency Vero Beach consumers are tired of but the high prices from the government monopoly. If the FMPA was clear on why their prices were higher would it matter? I think not.

Mayfield points out the third problem.

The FMPA has literally no supervision or oversight from any authoritative governing body.

Are you surprised a republican is calling for more government? So much for the idea of republicans rolling back laws. Vero Beach is upset about high prices and as Mayfield should know adding government layers only increases prices. Competition for the consumers dollars are what drive prices down.

Mayfield continues to make this a problem of regulation rather than competition. It is government that has screwed consumers by granting monopoly privileges to some.

With the FMPA standing alone, unregulated, utility customers have no recourse, no consumer protection, no elected body to blame when rates skyrocket, and no one to hold accountable for making strong fiscal decisions with ratepayer dollars.

Where is the limited government Debbie Mayfield? Consumer protection? Government harmed them by creating monopolies. No elected body to blame? Yes the elected body is the culprit for continuing to bestow monopoly privilege. In the market without monopolies businesses compete to lower prices. There is no monopoly to set rates. Instead businesses are subject to the demands of millions of consumers voting with their dollars. Some will point to lower prices of other monopolies as being fair. But fair to who? We’ll never know how much lower prices could be due to government regulation insulating privileged companies and harming consumers by criminalizing competition.

It makes no sense for tens of thousands of Floridians to be excluded from the essential consumer protections afforded by regulation.

Debbie has it completely backwards. Government regulation bestowing monopoly privilege started the problem. More regulation of said monopolies only entrenches these bloodsuckers further. Instead government needs eliminate regulations granting monopoly privilege. Rather than apologize for government regulations creating the problem of higher prices in government’s omnipotence they can intervene and fix the problem of regulation with more regulations. Strangulation by regulation. #ICantBreathe

Mayfield seems to have forgotten why people in Vero Beach are upset. The prices. Being locked into the contract just makes it that much worse and highlights the problem of government granting any company monopoly privileges. Everyone in the monopoly territory is subjected to do business with that firm. It’s not an issue of oversight but of getting what consumers want and government has outlawed them from- competition and the lower prices it brings.

How can there be competition in monopolies? Aren’t public utilities special?

The very term “public utility” … is an absurd one. Every good is useful “to the public,” and almost every good … may be considered “necessary.” Any designation of a few industries as “public utilities” is completely arbitrary and unjustified. — Murray Rothbard, Power and Market

What about the internet? Smartphones? To what is “necessary” depends on the individuals you ask. Some would say shoes are necessary but even Eve Samples wouldn’t want government issued shoes.

Don’t we have to have monopolies to actually get power? Aren’t there just some “natural monopolies?”

According to natural-monopoly theory, competition cannot persist in the electric-utility industry. But the theory is contradicted by the fact that competition has in fact persisted for decades in dozens of US cities. Economist Walter J. Primeaux has studied electric utility competition for more than 20 years. In his 1986 book, Direct Utility Competition: The Natural Monopoly Myth, he concludes that in those cities where there is direct competition in the electric utility industries:

  1. Direct rivalry between two competing firms has existed for very long periods of time — for over 80 years in some cities;
  2. The rival electric utilities compete vigorously through prices and services;
  3. Customers have gained substantial benefits from the competition, compared to cities were there are electric utility monopolies;
  4. Contrary to natural-monopoly theory, costs are actually lower where there are two firms operating;
  5. Contrary to natural-monopoly theory, there is no more excess capacity under competition than under monopoly in the electric utility industry;
  6. The theory of natural monopoly fails on every count: competition exists, price wars are not “serious,” there is better consumer service and lower prices with competition, competition persists for very long periods of time, and consumers themselves prefer competition to regulated monopoly; and
  7. Any consumer satisfaction problems caused by dual power lines are considered by consumers to be less significant than the benefits from competition.[42]

– Tom DiLorenzo, The Myth of Natural Monopoly

Now you may be saying ok it sounds absurd to have a monopoly but has it ever been done? Has there ever been competition for utilities without chaos? DiLorenzo continues:

California is transforming its electric utility industry “from a monopoly controlled by a handful of publicly held utilities to an open market.”[43] Other states are moving in the same direction, finally abandoning the baseless theory of natural monopoly in favor of natural competition:[44]

  • The Ormet Corporation, an aluminum smelter in West Virginia, obtained state permission to solicit competitive bids from 40 electric utilities;
  • Alcan Aluminum Corp. in Oswego, New York has taken advantage of technological breakthroughs that allowed it to build a new power generating plant next to its mill, cutting its power costs by two-thirds. Niagara Mohawk, its previous (and higher-priced) power supplier, is suing the state to prohibit Alcan from using its own power;
  • Arizona political authorities allowed Cargill, Inc. to buy power from anywhere in the West; the company expects to save $8 million per year;
  • New federal laws permit utilities to import lower-priced power, using the power lines of other companies to transport it;
  • Wisconsin Public Service commissioner Scott Neitzel recently declared, “free markets are the best mechanism for delivering to the consumer … the best service at the lowest cost”;
  • The prospect of future competition is already forcing some electric utility monopolies to cut their costs and prices. When the TVAwas faced with competition from Duke Power in 1988, it managed to hold its rates steady without an increase for the next several years.

Not only do we need to end the bureaucrat-run FMPA but we need to end all monopolies that only exist because at onetime some bought politician used their power to help grant privileges to the chosen company.

We certainly don’t need more government regulation of the companies it has chosen to rip us off. We need to be able to hire and fire companies based upon each individuals preference.

For more on the myth of public utilities here is a lecture by Tom DiLorenzo.

Debbie Mayfield: ‘FMPA has a monopolistic dictatorship that’s bordering on un-American’ – TC Palm.

If you like the work here then please donate today.

Follow us on Facebook and Twitter.

Subscribe by email and never miss a post.