The Failure In Our Public Utilities

Wildfires throughout California last year bedeviled that state's utility companies. Unable to adapt their power grids, utilities forced upon their customers brown-outs and shut downs of the sort usually reserved for third-world countries. Fires caused by under-maintained systems resulted in deaths and massive loss of property. Some folks made political hay from California's woes. After-all, so many of their problems seemed self-inflicted. An environment first mentality combined with an underinvestment in traditional generation facilities brought the Hollywood and Tech crowd down. California's Eco-Capitalism was seen by many as just another failed attempt at social engineering. 

Safe within a uniquely unregulated system that provided some of the lowest utility costs in the country, politicians and economic development voices from Texas were some of the loudest denigrating what had happened in California... they're not talking anymore.

A cold snap, not unlike past cold naps, laid Texas low. Windmills stopped turning, but not in Iowa or the Dakotas. Natural gas pipelines and facilities froze up, but not in Alaska. Even an atomic facility was forced off-line for a short period of time. Local reporting indicated that in most cases, the problem was as simple (and as simple to correct) as a lack of winterization of the Texas facilities. Clearly what folks in California and Texas want by way of local government regulation of utilities is very different, but what both states got was similar - damaged economies and loss of life. The reason is simple - regulators failed to understand the priority or purpose to their mandate.

Utilities are not pure for-profit or state enterprises, but rather an amalgamation of both. The primary purpose of utility regulation is to provide two socially advantageous outcomes. First, the generation of safe and reliable power. This presumes the approval of all necessary infrastructure and maintenance with the issuance of any necessary capital to pay for it. Second, is that the shareowners earn a profit. In fact, utilities are one of a few sectors where shareholders are assisted by government regulators in achieving regular profits. Owners and regulators are expected to work together. It's a shared responsibility.

In California, it would have been best if the Utilities Commission had actually seen the maintenance cost billed to utility users had actually been spent for tower maintenance and fire prevention. As for Texas - regulators tolerated a lack of capital expenditures combined with a faulty sense that profit motive alone would allow generation facilities to spring up spontaneous with need.

We can argue the extent to which economies were damaged or which state was most negligent, but in both states people died unnecessarily. People died because their state regulators would rather use their offices to promulgate environmental policy or engage in free market experiments in a public utility marketplace. Neither environmental policy or free market experiments were the original mission. Regulators played politics when they should have been doing the less glamorous work of seeing to the need for safe and reliable energy.