Municipalization v. Xcel: The false choice

This is a formatted version of the guest opinion printed on 10/06/2013

Do you want technology that continually gets much greener rather than becomes obsolete?

The municipalization controversy is framed as Boulder v. Xcel. Neither of these options is particularly green. The best option, an option not presented, is to let the consumer choose the provider of power.

From Inside Climate News (German Law Gave Ordinary Citizens a Stake in Switch to Clean Energy):

Centralized power generation is such an entrenched part of the U.S. electrical system that most Americans just assume that the only way to get power is from a few large generating plants, usually owned by corporate utilities operating as monopolies.

Not in Germany. Decentralizing electricity was at the core … . If utilities had remained in control of electrical generation, renewable power would still be a novelty.

Seventeen  U.S. states have power choice. In Connecticut more than 25% of retail customers have choice. Two million Pennsylvanians have selected electric suppliers.

Monopolies – whether government regulated or government owned –  are inefficient because they have no competition: they lock themselves into a particular technology and use the law to lock out new competitors and technology. In order for consumers to have choice, these entrenched monopolies must be broken up. Substituting one monopoly (Xcel) with a government monopoly (Boulder) will make it that much harder to implement individual power choice. Once the sources of electricity are competitive, consumers can choose which ones they like and wish to pay for, and those with outdated forms that no one wants will bear the loss, not the ratepayers or taxpayers.

Indeed, Boulder would become an electrical power aggregator. It would select the power sources for its citizens rather than letting the citizens choose. This would be like letting Boulder decide which restaurants everyone in Boulder gets to eat at.

Instead of further entrenching political and economic power in monopolies, consider what Bill Clinton’s Secretary of Energy, Federico Peña, wrote:

Colorado can fully benefit from the technological revolution that is transforming the way we use electricity, much like the information technology that has bettered our lives with computers and smart phones. But lawmakers and regulators must first re-evaluate our stodgy electric industry.

Imagine that the year is 1988 and that the city of Boulder was considering the purchase of the city’s telephone grid. The entirely mythical argument for the purchase was compelling: the city was not profit-driven and thus could provide the same service at lower cost. Indeed, the engineers at CU asserted that they could deliver 9600 bits per second of computer data compared to the then-prevalent 4800. The citizens voted to pay $100,000,000 ($1,000 per person) for the infrastructure.

What was not envisioned back in 1988 was that it would be commonplace in 2013 for everyone to have a mobile telephone in their pocket capable of transmitting and receiving data at a rate 1,000 times faster than in 1988 allowing us to do Google searches and view videos. The 1988 telephone infrastructure has become nearly worthless. Today 29% of households in the U.S. don’t even have a land line anymore, down from 96% 15 years ago.  Boulder may take on hundreds of millions of dollars of debt to buy infrastructure that may be as outdated as buried telephone lines.

Assume for a moment that power generated from solar panels drops much further in price so that homeowner-produced electricity becomes plentiful and cheap. Does the Gentle Reader think that the City will welcome lots of common folk generating local power? What about all those Boulder rebates and grants? Someone will have to pay off all those hundreds of millions of dollars in debt.

I’m an optimist. I believe that breakthroughs will come in local generation of power just as there was an unexpected breakthrough in natural gas extraction.

The voters should push our lawmakers to let the market participants take the risks, for more choice and not less, and not stick the voters with an antiquated system that will cost them and their children dearly. A statewide citizen’s initiative could easily break these monopolies and give the consumers the ability to choose as much in the way of renewables as the citizens want. Since we all breath the same air, my guess is that citizens would want a lot of renewables thus further driving down the costs.

For the well-being of our environment and our wallets, let the markets work their wonders to be really green.

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One Response to Municipalization v. Xcel: The false choice

  1. Beth Williamson says:

    Question for Ralph: What do you think about fracking?

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