In thinking about transmission pricing for a competitive electric industry, we should remember that the fundamental objective of competition is to increase economic efficiency. Improved economic...
has competitive advantages that should be eliminated as restructuring goes forward. The fact that he has developed a real compromise is reflected in the broad-based, bipartisan support his bill has received from a growing list of co-sponsors and organizations such as Enron Corp., the Natural Resources Defense Council and Washington Water Power.
Is Smaller Better?
Common wisdom today is that big is better and more efficient. There may be some truth to that if your goal is to be a major player in power generation or power marketing. But the idea that a distribution system must serve five or 10 million customers to obtain economies of scale doesn't stand up to careful analysis. Such an analysis was undertaken by John E. Kwoka, a George Washington University economics professor.
In his book, Power Structure (em Ownership, Integration and Competition in the U.S. Electric Utility Industry, he concludes that small, publicly-owned utilities tend to provide distribution service at lower cost than investor-owned utilities. Public power's size may be a future competitive advantage.
Customers will make new choices based on both price and customer service. Historically, we have always beaten the competition on price, and should continue to do so. Public power also pays close attention to customer service, while there is evidence that our competitors are dropping this ball.
Findings in the 1998 American Customer Satisfaction Index, a measurement tool developed at the University of Michigan Business School's National Quality Research Center, are revealing. According to Mike Lyman of Arthur Andersen, the survey shows that "customer satisfaction is distinctly negative for more than half the North American utilities," and "as many utilities have prepared for deregulation, they've reduced staff, closed offices and outsourced customer contact functions. In addition, mergers within the industry have forced management to focus on other issues, leaving some 'customer care' initiatives to fall through the cracks."
Public power also finds innovative ways of improving its systems and providing better service in response to customer demand, such as increasing its involvement in telecommunications. It comes as no surprise that private telecommunications and cable TV companies have unleashed an assault on community involvement in telecommunications that mirrors the historic attacks on public power. Note, for example, the article in the September 15 issue of Public Utilities Fortnightly entitled "Munis Find Cable TV a Costly Business." This piece is based on highly biased and erroneous material produced by the Cable Telecommunications Association, the cable TV industry's equivalent of the Edison Electric Institute.
In addition, companies like Southwestern Bell are asking state legislatures to prevent cities and towns from engaging in telecommunications ventures of any sort. A provision of federal law would appear to pre-empt such restrictive and anti-competitive state legislation. Unfortunately, the Federal Communications Commission has yet to exercise this authority as intended by Congress.
Those who suggest that our mission has been fulfilled are extremely arrogant. Public power's mission is to provide an essential utility service to its community. It is not up to Mr. Bayless, EEI, other critics or the U.S. Congress to determine when, if ever, the time might be