The Drip, Drip, Drip of Socialism
My comments to a fellow free marketer's post about water utilities: "I am not familiar with water utility regulation but I am very familiar with electricity utility regulation. Assuming they are similar:
(1) If a private provider's costs increase, they are indeed under pressure until the regulator approves a rate increase assuming all other things are static. If however new ratepayers are added, their profits may go up because they are collecting more revenue. Moreover, if the provider's costs DECREASE, well, they just sit on that information, don't file a rate case with the regulator, and pocket the difference.
(2) Managers of a for-profit utility have an incentive to adopt new technologies if and only if it increases profitability. In electricity, operating costs are passed through and so there is little incentive to cut those. Moreover, the ultimate decider as to whether an innovation will benefit consumers is the regulator, not the consumers. If the regulator makes a bad call and the innovation does not benefit consumers, well, the consumers still pay.
What we need in the utility world are unregulated, competitive utilities. I am promoting that concept in the electricity space. We call it "Consumer Regulated Electricity".
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