Public ventures: Getting around ComEd’s rate dilemma
revised and reposted 10-29-2007 2:03 a.m.
original post Monday, August 6, 2007, 8:45 p.m.

Part two of a two-part essay
Previously: a short history of utility monopoly

We have a seeming dilemma on electric rates in Illinois. The key word is ‘seeming,’ of course.

ComEd demands higher electric rates because the parent company it created to absorb its generating plants, Exelon Corp., is raising the price of electricity to it so it can make more money. ComEd claims this is absolutely necessary or it will go bankrupt. As if Exelon would really ever let its subsidiary go out of business (if it did, it wouldn’t have a public to which to sell the power it generates … unless it wanted to sell that power at premium rates to the rest of the country instead, right? Leaving Illinois energy users up a creek. Hmmmm. There’s a thought).

Getting conned by ComEd, or What’s a utility monopoly for?
revised and reposted 10-29-2007 12:27 a.m.
original post Friday, 8-3-2007, 3:50 p.m.

 Part one of a two-part essay

What happens at an auction?

Whether the material on offer is famous artwork, the remains of an estate, multiple lots of fine wines, or a farm that went belly up, the point of an auction is to obtain competing bids in order to get the highest possible price for the seller. The shared expectation is that only one party other than the seller can get the goods, or win, and anyone who can’t offer more money than the top bidder loses. Whatever is in high demand is never a bargain at auction. Auctions are about maximizing income for the seller by getting someone who wants or needs the goods badly enough to be willing to pay a higher price than anyone else. No one is surprised when that happens.

So why did anyone believe energy companies and politicians when they told us that deregulating public utilities and allowing energy auctions would lower electric rates?

For those who think energy auctions are a good idea, I have two words: Enron. California. When energy costs in California skyrocketed a few years ago at a time demand increased and rolling blackouts became the norm, electric users paid insanely high rates while energy companies and their shareholders saw hefty profits. Firms like Enron made energy auctions possible and encouraged the excessive profits that buying energy ‘on the market’ instead of producing all a utility needs internally helped to create. Enron helped energy companies make obscene amounts of money even as they created an artificial shortage that allowed them to charge such high prices for energy bought at ‘market’ rates. And this subverted the purpose of giving public utilities a local monopoly.