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Author Topic: Why Privatize Utilites? Shouldn't the People Own Them?  (Read 29669 times)

LTNYC

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Why Privatize Utilites? Shouldn't the People Own Them?
« on: October 20, 2003, 03:20:34 pm »

I'm pretty impressed with the whole Free State Project concept. I just stumbled across the website today and I have to say I agree with almost everything the FSP stands for... EXCEPT privatizing utilities. When the government owns a utility - that means the people own the utility. When you sell publically held utilities to private companies then you are basically giving away a precious public resource which - if efficiently and carefully operated - can generate revenue for the community while also doing as little damage to the environment possible.

Look what happened in California - and what will soon happen in NY as Con Edison is forced to slowly sell off all of its electric generating stations - when public utilities were sold. One word: Enron. The whole concept of privatization is a scam. Big business pushes privatization as a panacea. The reality is that public companies can be run just as inefficiently and crookedly as publicly held companies. The only difference is that we can't control a huge corporation as well as we can control a government-run business. Think about it. The government is us - we own the government and we own public companies. Why we would sell them - rather than reform them ourselves - and reinvest the profits into the community instead of making another Kenny-boy a bazillionaire - is a mystery to me.

Thanks for your time.

Yours,
LT
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atr

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Re:Why Privatize Utilites? Shouldn't the People Own Them?
« Reply #1 on: October 20, 2003, 04:15:48 pm »

Truly free markets, in which the government does not participate, make many people uncomfortable. I believe that this is primarily due to lack of familiarity.

First of all, it should be clarified that California's "deregulation" was nothing of the sort. The government maintained price caps and a complicated network-sharing requirement.
http://www.cato.org/research/articles/taylor-010119.html

If the government itself owns and operates a power plant, it's to be expected that it would not be self-sustaining (nor would it be profitable). If it were owned by the government, and had no competition, what incentive would it have to be profitable? Prices would be capped to keep the citizens happy, but government revenues would subsidize the plant. This means that taxpayers who don't use electricity, or use less of it, end up paying disproportionately to keep electricity costs low for the other citizens who use more electricity.

I lived in California during the rolling blackouts a couple of years ago, and the above describes roughly what happened there. Gray Davis was scrambling to get an emergency spending authorization of billions of dollars to keep electricity rates from rising too much. Clearly, the people in California who used the most electricity would benefit the most from this expenditure. This was a massive transfer of wealth from the taxpayers of California, through their taxes, to the California entities that used the most electricity.

Network-based services, like phones and electricity, have larger barriers-to-entry than other industries, which I think makes people insecure about deregulating them. The miracle of the free market, though, is that it addresses the potential problems in any market situation, including those involving network-based services.

Imagine for a moment that your state government has "sold" the power plant to a private company, which is thereafter totally unregulated by the government (except possibly through pollution rules or the sale of pollution credits). You're worried that the private company is going to start raising prices on electricity. In fact, let's say that's what happens. One thing that's likely, though, is that your tax rates will decrease, because the government is no longer subsidizing the power plant. But regardless, you have a lot of options for dealing with increased electricity costs. You can use less electricity, which will make the power company re-think its price-increase. You can move to another area serviced by a less-expensive power plant. You can invest heavily in fuel cell technology, or even buy solar panels for your roof. You can ask (or maybe even pay for) the nearby power company to run a wire to your house. All of these alternatives, whether you pursue them or not, disincentivize the new private power company from raising prices.
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Tracy Saboe

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Re:Why Privatize Utilites? Shouldn't the People Own Them?
« Reply #2 on: October 20, 2003, 09:49:07 pm »

California's "deregulation" wasn't deregulation.

If the word exist's it should be called "reregulation"

They scrapped the old regulations and put the new regulations in it's place with price controls, and everything.

If you're looking at California for an example of why deregulation doesn't work, you're looking in the wrong place to find an example.

FEE has done alot with deregulating Utilities

The California Power Mess
http://www.fee.org/vnews.php?nid=101

Did Deregulation Kill California?
http://www.fee.org/vnews.php?nid=4964

Electrical Utilities: The Final Deregulatory Frontier,”
http://www.fee.org/vnews.php?nid=3898

Wasting Energy on Energy Efficiency
http://www.fee.org/vnews.php?nid=4291

The Failure of the ‘Middle Way,’
http://www.fee.org/vnews.php?nid=1671

Deregulation of the Natural Gas Industry
http://www.fee.org/vnews.php?nid=1651

In fact the foundation for Economic education has lots of excellent articles. They are quite long. But they will open your eyes.

Tracy Saboe
http://www.fee.org/
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BillG

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Re:Why Privatize Utilites? Shouldn't the People Own Them?
« Reply #3 on: October 20, 2003, 11:03:27 pm »

Quote
If you're looking at California for an example of why deregulation doesn't work, you're looking in the wrong place to find an example.

Funny thing though - while private utilities have driven California to the brink of ruin, its two major public-owned utilities in LA have thrived even selling surplus energy throughout the region...

http://www.fair.org/extra/0105/deregulation.html

Yeah maybe you need to be looking in Ohio & Texas for a bunch of bandits called FirstEnergy" & "Enron" and their buddies in the Whitehouse...

http://www.corpwatch.org/issues/PID.jsp?articleid=8131

Here is how it works in a nutshell...utilities are convinced by wall street bandits that thru deregulation the company is worth more to stockholders sold off to larger conglomerates than fullfilling their current public charter. So, they make the assets look better on paper than they are really worth by neglecting maintenance, repairs and upgrades on the network. And guess what happens when the blackout comes they are looking for a bailout from their buddies who they help put in office!

Read it and weep Tracy!

http://www.gregpalast.com/detail.cfm?artid=258&row=1

Quote
When you sell publically held utilities to private companies then you are basically giving away a precious public resource which - if efficiently and carefully operated - can generate revenue for the community while also doing as little damage to the environment possible.

LTNYC get yourself over to the Geo-libertarian threads asap before you fall under the curse of the Neo-libertarians shameless attempts at "privatizing the commons"

you might want to satrt with some of the links on my website: http://www.geocities.com/geolibertariangreens/Geo2.html

or this one on the "SkyTrust"
http://skybook.org/

your instincts are right on they just need a little Geo tune-up!
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Leonard

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Re:Why Privatize Utilites? Shouldn't the People Own Them?
« Reply #4 on: October 20, 2003, 11:09:17 pm »

When the government owns a utility - that means the people own the utility.

True of government ownership of anything, not just utilities.  Yet most people understand that the government cannot do everything well.  

Most libertarians believe that the government does almost nothing well.  Look at USPS efficiency - even after years of competition they lose money.  Look at how well the states run their monopoly school systems.  Look at other countries such as the USSR, where the state ran everything.  In an almost endless array of cases, states have run various businesses.  There's a commonality running through all the cases - they run them badly.  In very few things can the argument even be made that State-run things work well; and in these cases it is usually the case that there are no private comparisons to be had (think of the military).

If you look into it, I believe you will discover that the state is not the right institution to run most things.  

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Look what happened in California -

A good example of "privatization", but not an example of privatization.

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The government is us - we own the government and we own public companies.

This is just silly.  Is there no law that you think is wrong?  Gun laws, drug laws, speed limits, anything?  If so, then you should realize that the government is not "us".  Rather it is all the other people.  It represents the 51%, not the minority.  Furthermore, the State is in fact a distinct group of people with their own self-interests to consider.  They are part of the people, yes.  And they are partly controlled via democratic processes by the voters.  But the identity is by no means anywhere near 100%.  If I had to guess I would say maybe 50%.  The rest of the time they are looking out for #1.

If there is no law you disagree with, well, I dunno why a libertarian activist organization has any appeal.  

Quote
Why we would sell them - rather than reform them ourselves - and reinvest the profits into the community instead ... is a mystery to me.

For the exact same reasons that we generally don't want much, if any, government via the state.  These are:

(1) private property - if I start a business it is mine, not the government's.  Historically, most of the businesses which were government monopolies were originally private.  Governments dispossessed business owners to get them.  Those that were never private (think cable TV) were allocated via political means from the get-go.  They could and should have been done privately.

(2) economic efficiency - everything the state touches turns to crap.  If you want something done well, don't let the state near it.  Only if it is absolutely pressing to exert "social control" over some process should it be run via the state.  Many libertarians think that policing and defense are pressing enough.  Very few think that, i.e., delivery of telephone services is.

(3) liberty more generally - socialism has a strong tendancy to creep.  Consider the schools.  Part of what's at issue is state control; but partly it is the taxation, truancy laws, persecution of home schoolers, and other intrusions into the family that are necessary for the system.  
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LibertyLover

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Re:Why Privatize Utilites? Shouldn't the People Own Them?
« Reply #5 on: October 21, 2003, 02:51:28 pm »

Quote
If you're looking at California for an example of why deregulation doesn't work, you're looking in the wrong place to find an example.

Funny thing though - while private utilities have driven California to the brink of ruin, its two major public-owned utilities in LA have thrived even selling surplus energy throughout the region...


Private, unsubsidized, unregulated companies will always be more efficient than government owned and operated "businesses" that don't have to make a profit because they are funded by taxpayers. The irony with the California utilities is that the private companies were subsidized and regulated while the two successful "public" companies were pretty much left alone to run like businesses. They weren't showered with windfall profits and then forced to provide power at below market prices like the private companies were at "deregulation."
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Roycerson

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Re:Why Privatize Utilites? Shouldn't the People Own Them?
« Reply #6 on: October 22, 2003, 06:49:33 pm »

 Quote:
When you sell publically held utilities to private companies then you are basically giving away a precious public resource which - if efficiently and carefully operated - can generate revenue for the community while also doing as little damage to the environment possible.  

How is something that is owned by the community and serves the community going to generate revenue for the community.  It is the community who is paying in the first place.  Are you suggesting that payments made by the community are then going to be returned to the community thus creating revenue that didn't previously exist?  
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NuclearDruid

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Re:Why Privatize Utilites? Shouldn't the People Own Them?
« Reply #7 on: October 23, 2003, 07:35:43 am »

Quote:
When you sell publically held utilities to private companies then you are basically giving away a precious public resource which - if efficiently and carefully operated - can generate revenue for the community while also doing as little damage to the environment possible.  

How is something that is owned by the community and serves the community going to generate revenue for the community.  It is the community who is paying in the first place.  Are you suggesting that payments made by the community are then going to be returned to the community thus creating revenue that didn't previously exist?  

While I disagree with LTNYC's original thesis, there is an answer to this particular question. A power plant will be sized to meet the peak demand of community, plus a margin, plus anticipated growth over a period of years. Power plants are operated most efficiently at full power so excess off-peak capacity would be sold back to the grid. If you assume that electricty is sold to the community at market prices then these off-peak sales will generate revenue from areas outside the community. Of course prices to the community could be lower that market with the off-peak revenues subsidizing this price.

ND
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Tracy Saboe

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Re:Why Privatize Utilites? Shouldn't the People Own Them?
« Reply #8 on: October 24, 2003, 04:37:28 pm »

BillG

The Private Utilaties in CAlifornia are all subjagated to price controls. The reason the public companies can do it is because they get taxpayer subsidies.

Bill, the more I learn about you, the more socialistic I realize you are.

Tracy

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adam86

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Re:Why Privatize Utilites? Shouldn't the People Own Them?
« Reply #9 on: October 24, 2003, 09:36:56 pm »

It seems that the most libertarian thing to do is to be off the grid (e.g. solar energy). Unfortunately, even some alternative energy companies use government money.
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LeopardPM

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Re:Why Privatize Utilites? Shouldn't the People Own Them?
« Reply #10 on: October 29, 2003, 02:02:34 am »

It seems that the most libertarian thing to do is to be off the grid (e.g. solar energy). Unfortunately, even some alternative energy companies use government money.
sorry Adam, the most libertarian thing to do is examine your values and proceed in a fashion along those lines: If getting power from the 'grid' is cheaper than generating your own AND that has a higher value to you than allowing yourself to take part is some socialized government controlled public utility system, then go for it!

Myself, I think neighborhood or small community power generation systems would be optimal: relatively efficient power generation with the ability to have competing local energy businesses to keep the market forces flowing and increase service to customers.

LTNYC:
Quote
Look what happened in California - and what will soon happen in NY as Con Edison is forced to slowly sell off all of its electric generating stations - when public utilities were sold. One word: Enron
As has been pointed out earlier, the California problem is not a result of deregulation, but rather a prime example of how government interference ruins service and businesses.

Re: Enron
LOL - I just love that all the anti-capitalists now all have this prime example of 'Evil Corporations' to throw in the face of privatization/free marketeers.  Enron is one of a few, perhaps even many corporations which have deciet, fraud, and corruption at the top levels.  It and the actual people who defrauded shareholders should be forced to pay copensation and held liable for ALL of their actions.  BUT, these corporate examples of 'bad humans' are FAR less evil than the corruption that runs rampant through our or any government.  Our government kills, actually kills citizens by denying them drugs - it forces people into poverty, it forces adherrence to an educational system which is not only outdated and useless, but is essentially a nationwide indoctrination camp system for creating 'good little worker bees' - and it even fails in this attempt.  So to tout 'Enron' as the reason why Privatization is 'bad' and government 'good' is a big whitewash...

michael
michael
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Kyle

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Re:Why Privatize Utilites? Shouldn't the People Own Them?
« Reply #11 on: October 30, 2003, 12:14:34 am »

First post from one who has been lurking for some time.

I'm okay with utilities being privatized, but how would the actual functionality of it work?  Would we force right of way on private property for utilities to cross?  If not, how do we deliver services to people who are surrounded by land owners who do not want said utilities crossing their land?  How would, say, water competition work?  If 40 water companies wanted to run their pipes across a guy's land to reach a potential customer, would they be permitted to?  If not, how can we get water to the isolated landowner?

I'm fine with private ownership, but help me understand the functional workings of how this could work.
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LeopardPM

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Re:Why Privatize Utilites? Shouldn't the People Own Them?
« Reply #12 on: October 30, 2003, 01:45:17 am »

First post from one who has been lurking for some time.

I'm okay with utilities being privatized, but how would the actual functionality of it work?  Would we force right of way on private property for utilities to cross?  If not, how do we deliver services to people who are surrounded by land owners who do not want said utilities crossing their land?  How would, say, water competition work?  If 40 water companies wanted to run their pipes across a guy's land to reach a potential customer, would they be permitted to?  If not, how can we get water to the isolated landowner?

I'm fine with private ownership, but help me understand the functional workings of how this could work.

Dearest Kyle,
Hello and welcome to the non-lurking crowd!  glad you decided to appear because your post accidently highlights the fundamental problem that people have with privatization.. namely, 'Ok, so how would it work?'

Well, first off, I am a Printer.  I am very good a pre-press computer work (over 15 yrs) and with finding work-arounds for problems with machinery.  I don't know what your talents/expertise is, BUT, I bet that neither of us are energy consultants or Power distribution Managers or whatever the title would be of someone who knows the indepth workings of the grid and various ways to distribute power or services to a large area.

So, here is the 'leap of faith' that we all must take: Based on: our observations of the Free Market and the accomplishments of private business... Do we believe that the free Market has a much better chance of solving problems, discovering new technologies or methods, making systems more efficient than the government?  I say, "yes!".  I don't have to know HOW private roads will change our society for the better, I just have to trust that the Free Market is much better at solving problems than the government is all.  The 'How' will be discovered by the people who put the energy and effort in trying to satisfy their 'customers' so that they can make money.

In addition, there is NO WAY for us to forecast what will come about when the market is left unfettered and able to find perhaps alternate methods of solving a problem.

For instance:  The problem we are talking about is 'What is the best way for people to have power provided (generated) to their homes?"

Well, there is the current way: large centralized generation plants and many miles of cables connecting each and every house.  It has pros and cons.  Is it the cheapest, most efficient method?  I say no - not necessarily because I personnally know of a better way, but because this is the method that the government 'choose' way back in the 1920's - 1930's (i think) and it used its powers of eminent domain and monopolistic granting to a select few cabling and electric utilities to obtain the results.  This totally skewed the market in this area.  Will a 'bad' solution win out over the 'best' solution?  Yes, when the government puts its weight behind the 'bad' solution.  centralization actually may have even been the 'best' solution, at least at that point in time, BUT, with the costs subsidized by government and taxes, other technologies and methods had no hope of competing - so we are stuck with what we got today and for years to come without having a chance to change for the better.  The free market allows the replacement of old methods and technologies at a pace that government looks stagnant compared to.

Alternative #1:  perhaps a centralized power generation station, but without the cabling which introduce frictional (resistance) losses.  perhaps microwave transmission to neighborhood receiver units THEN cabling to the houses there.  Who knows, this method probably has  some problems with it because I am only a Printer with some electronics background and a bit of inventor thrown in for fun.

Alternative #2: How about smaller, neighborhood power plants which each might choose to use a different fuel source?  some might end up choosing coal, some wind power, some solar, some hydrogen pellets, some biomass... all depending on the values of the neighborhood: a 'green' neighborhood might not choose 'dirty' coal or oil but instead choos solar, even if the cost is higher.

Alternative #3: Who knows?  it could be something I can't even imagine... or you...

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Would we force right of way on private property for utilities to cross?
no, never in a million years

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If not, how do we deliver services to people who are surrounded by land owners who do not want said utilities crossing their land?  How would, say, water competition work?  If 40 water companies wanted to run their pipes across a guy's land to reach a potential customer, would they be permitted to?
they would be permitted to only if the land owner agreed and was probably granted some sort of compensation.  On a side note, you need to put yourself in the situation: would you purchase land/house that did not have access to necessary utilities? probably not.  so land that doesn't have access would lose value.  Would a developer create a community of houses which had no value because they had no access to some utility? No, he would make damned sure that each and every house hat was built had access to all of the variety of utilities else he would lose his shirt...



Quote
If not, how can we get water to the isolated landowner?
look, it is not my job or responsibility to make sure every idiot doesn't suffer the consequences for their own actions/choices.  If someone buys a piece of land in Nowhere, Nevada becuase it is 'dirt' cheap, then demands to have water 'provided' to him - I say tough bull-pucky buddy, you knew what was out there and that is why the land was so cheap - if you buy land closer to the city and to a utility it will cost more BECAUSE you are paying for the convienence of that locality.  this brings up another point - idiots who build houses in high-risk areas like: known paths of hurricanes, floodplains, earthquake faults, volcanos, etc.  They build their little house, knowing full well that there is a risk of propery damage or loss, then, when it happens, they cry 'oh, poor me!  The big bad act of God destroyed my home and now I have lost everything!' and WE (taxpayers) are FORCED to provide money (federal emergency fund) to pay for a new house for them - THEN they have the GALL to rebuild on the exact same spot!!!!  ARGH!  If I want to live on the ocean in Florida right in the KNOWN path of hurricanes, I will: (1) make sure I have hurricane insurance, and/or, (2) build my house so that it is darn near indestrucible, (3) take the risk and not buy insurance or build el tuffo house (saving lots o bucks) and just rebuild myself every 4-10 years.  NEVER would I ask some smoe in no-hurricane-risk colorado to pay for a new house for me everytime mine gets swallowed by the sea!  (sorry, small rant there...)


yours in liberty,
michael
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Kyle

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Re:Why Privatize Utilites? Shouldn't the People Own Them?
« Reply #13 on: October 30, 2003, 07:38:15 pm »

Thank you for the welcome!

That's all well and fine, but what about when land is sold?  Say everyone had water pipes running through their back yard and everyone is fine with that arrangement as they are all getting water.  Buyer B buys Buyer A's land and house and insists that the pipes be taken out of his yard.  He plans to buy bottled water and he has an outhouse, so he has no need for pipes.  Let's assume there's no other route to deliver water to the rest of the street.  It seems a dilly of a pickle that the rest of the landowners on the street just lost most of their property value, and the land is potentially no longer livable.  This doesn't seem to foster investment in the free state, in fact, I think it might discourage it.  Of course, I'm not for entitlement programs, but at the same time, it seems remiss in the free state to allow one schmuck to hold the whole street hostage.
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BillG

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Re:Why Privatize Utilites? Shouldn't the People Own Them?
« Reply #14 on: October 30, 2003, 10:15:37 pm »

Quote
I don't have to know HOW private roads will change our society for the better, I just have to trust that the Free Market is much better at solving problems than the government is all.  The 'How' will be discovered by the people who put the energy and effort in trying to satisfy their 'customers' so that they can make money.

Well you do have to know HOW if you expect to be effective politically in this state...we don't take too kindly to snake oil salesman!

Quote
In addition, there is NO WAY for us to forecast what will come about when the market is left unfettered and able to find perhaps alternate methods of solving a problem.

Yeah, take a look at Enron and Harken Energy for proto-types!

There is no current (and in the foreseeable 5-10 yr. future) way around the transmission lines problem w/conventional sources it matters not a wit whether it is centralized or not unless we all have individual power generating facilities at our house - which the fuel cell will hopefully be someday.

As someone who has spent 20 years in the energy conservation field the only way to get at the myriad of problem surrounding our energy situation is to deal with ALL of the economic externalities that are not factored into the price of oil. Once those are included and certain energy industries are no longer heavily subsidized then the consumer can make intelligent choices about energy and industry will be given the proper signals about where to put their research.

Decentralizing the energy system should be a national security issue...
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