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Energy in the U.S. is still a monopoly – Deregulate? Decentralize?

Energy in the U.S. is still a monopoly – Deregulate? Decentralize?

This is not my usual fair, but it is highly political. And it affects EVERYBODY.

On Thursday, September 29th, at the Penn Club in Manhattan, the Financial Policy Council (FPC) and Rational Energy will sponsor “Chasing Renewable Energy Investment, Obstacles, Distortions, and Ponzi Schemes” with an expert panel to discuss what is stopping the renewables market from reaching its worldwide potential.

This is sponsored by the parent company of PBP. Yours truly is a panelist.

Power is a monopoly. It is multiple monopolies, not just in the U.S. but mostly around the world. You almost never have an option as to which power company you can use. Unless of course, you have the wherewithal to generate your own.

The transition to renewable energy is much desired in the marketplace. The “branding” is so large and prevalent that it will never go away.

Liberals are so anxious to see this through that they push endlessly. Conservatives always love to see businesses thrive, including renewables, but are adamantly against the subsidies and the political machinations that are interfering with markets. We see in places like California that the “transition” to renewable energy is rough and slow.

I believe that governments and monopoly power companies are in the way of a transition to a better, more robust and cleaner power grid.

The power companies and the local governments will argue that power is so important that any attempt to deregulate and add more competitors would destabilize the grid and cause massive problems. But is this true?

Funny, those of you who are a bit older might remember when AT&T and Bell Telephone ruled all communications in the U.S. They said the same thing. Communications were so important that to mess with their monopoly would be a disaster that would sink the country. It HAD to be left in their hands. We learned better.

I’m sure this is what the banking industry thought, and the airline industry thought when they were deregulated, that disaster was imminent and the country would collapse.

But what really happens when you deregulate?

According to a piece of research by Gary Kim, writing for Lucent Technologies in the 1990s, the same things always happen when you deregulate and open up a market. First, you have thousands of innovative companies entering the market, it is utter chaos. They compete for customers, they add exciting new services. New protocols are developed, new ways of doing business are formulated, tested and marketed. And lots of fighting, lawsuits, etc. (great fun!).

Second, the industry begins to consolidate. Larger companies buy the smaller ones, and in turn, are bought off by even bigger ones. If your company isn’t bought, then you are irrelevant.

Finally, you have a market that is stable with several very large players, and a marketplace with access for smaller ones, It becomes a completely different market, more robust and poised to incorporate new ideas as we think of them.

We have seen the benefits of deregulation and indeed, decentralization in an industry. The internet is decentralized. Cryptocurrency is decentralized. Cellular telephone has a robust competitive environment. Decentralization means that a lot of people can profit, not just a few.

This is something I will be discussing at the event in New York on the 29th. If you can to be around and want to see, you can register here (open bar and elegant finger food will be served…).

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2 Comments

  1. Larry kuhn

    We were energy independent and exported energy. But voter fraud put a stop to it.

  2. frank stetson

    If these are your panel points, I think you got the “start with a joke” part down pat.

    “This is not my usual fair, but it is highly political.” The fair fare is just fair to many but unfair fair fare to a few. I thought you more of a “cairny” type of guy. Would that be town, county, or State “fair? I know Republicans hate Federal Fairs, too big…..if there was one.

    More funnies, your title says Energy, but your lead is Power, and the article actually seems to be only about electric although you never actually say it. OK, that’s only a little funny but you may want to consider a consistent nomenclature.

    For most of these industries, you may want to go with oligopoly instead of monopoly too or at least try monopolistic. That’s safer, like using semi-fascist to try to take the edge off. I know what you mean, you are saying just one choice per customer, but the term monopoly describes the seller, not the buyer. There are 3,300 electric providers in the US, of which 200 provide over 50% of the total product. To get another supplier, you have to move, one county East in my case. Further, in over a third of the nation, NJ for example, electric is deregulated and consumers can choose to get power from lots of suppliers. Yes, they share the same grid, and some share grid power; others provide their own. I think over a third of the states have deregulated electric. Over 17 states do this now. I think concluding it’s a monopoly is funny, concluding it’s multiple monopolies is just silly.

    Your: “It is multiple monopolies” is the priceless gem that will never get old. Oxymoron much? Multiple monopolies, free gift, conservative news, army intelligence….. you get my drift.

    I do agree that the phone company deregulation led to more consumer choices, lower prices, and creative solutions. I like Gary, but he is a telecom brat, not a deregulation brat. I don’t agree what Gary describes is the standard deregulation result. I just don’t know. But even with telecom’s deregulation success, AT&T spun Lucent, Lucent blossomed, mushroomed, collapsed, and died taking Bell Labs with it, so not all swanky. Now, Nokia of Finland owns it after the French gave up and it’s a ghost of it’s former self and Bell Labs is basically gone. The cost of deregulation was losing Bell Labs for America. AT&T downsized for over a decade, not a fun place to try to survive. Verizon was a dinosaur at deregulation, they found cell phones, and now is the 800-pound market gorilla out there as the other remaining half dozen Baby Bells should have been aborted in the 15th week given their results. So, not exactly fuckin-a-skippy there either. And Chinese technology is now embedded in our network……viva la deregulation.

    Deregulation of Wall Street in the 1990’s almost sunk our economy in 2008. Power dereg. in Texas caused the grid collapse killing a good number of customers. And that’s just industry deregulation; deregulate can also mean just less regulations on a business which can result in things like Deep Water Horizon and the fracking disasters killing our our water supply. So, I would say deregulation has a place, but each market example is unique, there is no cookie cutter for success here and there are many disasters to go with the telecom experience, and many disasters within the telecom experience.

    You then say: “The internet is decentralized.” Are we back on the comedy track? If decentralized, then where is the center?

    I think I know what you mean, and many people use the term, but they are wrong. I think enough say decentralized and you can get away with it, but it always makes me twitch a bit. First, the internet, like the telecom industry, has a lot of working parts. I am guessing you mean the actual internet highway, network itself. So, don’t you mean distributed or do you really mean decentralized, like there is a center…..a central…..as in decentralized? Being a bit facetious, but the internet also can be infrastructure, protocols, data, standards, applications, etc. Lots of moving parts. Ask Al Gore, the inventor. For now, let’s just deal with the network infrastructure, the pipes, the highway, since I am guessing that’s your direction. The internet infrastructure has many owners, but no core. It is a distributed network, not decentralized. Packet networks, but definition of the technology, are generally distributed, not decentralized. But, the industry, the market, like electric power, where only a few control most of the bandwidth in the US is an Oligopoly. About five companies own the majority of internet pipes and bandwidth in the US; low and behold many are communication companies who already had infrastructure in place. Again, another oligopoly — welcome to corporate America.

    No Joe, deregulation is not the answer to everything regulated. Not always. But I loved your jokes! Mission accomplished. Nice gig, nice part of town.

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