AZ Electric Utility Rates: Regulated Monopoly or Free-Market Competition?

gavel1-300x223In May, 2013, the Arizona Corporation Commission (ACC) opened a docket to gather information on how Arizona might allow competition among electric companies. On September 11, they shut down the docket with a 4-1 vote, citing “legal issues” that were apparently just too much trouble to tackle. Maybe the ACC will tell us more about that later(?).

So until & unless a new docket on the subject is opened, it’s over.  Of course, Arizona residents do still have a choice: either sign up with the one company legally allowed to provide electric service in your area or go without electricity altogether.

APS and SRP are regulated monopolies. The ACC sets the rate of return that they are allowed to earn on their capital investment in generating stations, transmission lines, and so on*. Their day-to-day operating expenses, depreciation expenses, taxes, etc. are fully covered, dollar-for-dollar, by their customers (you and me). That’s the law.

power-transmissionIs that so bad? Yes, it can be. This is the classic problem of regulated monopolies. While their rate of return is firmly capped by ACC, what are the incentives these monopolies have to hold down their capital expenditures on which they earn that guaranteed return? And what are their incentives to minimize expenses such as payroll? Technically, there aren’t any, other than their own good will and the ACC looking over their shoulder.

So can’t the ACC guarantee that the monopolies are run efficiently?  Oh, would that it were!  No, ACC politicians can’t hope to micromanage a monopoly for efficiency.  On the other hand, if there were competition, the utility would have to run itself efficiently or lose customers to a more efficient competitor that could charge lower prices.

Even when the monopolies are run by people of good will and good intentions**, they can easily slip into inefficient behaviors when there is no overriding free-market, profit-motivated, competitive incentive to stay efficient and keep prices down.

Bell_System_1939I’ve been through deregulation before. From 1969 to 1984, I worked at Bell Laboratories, the research arm of the biggest regulated monopoly ever — the old Bell System (“Ma Bell”).  We even had our own tightly coupled manufacturing arm called Western Electric.  The old Bell System was heavily regulated at the federal, state, and (in some states like Texas) local level.

In the old Bell System our advertising proudly claimed that we provided the world’s best telephone service at the world’s lowest prices. And we really did. But the DOJ Antitrust Division broke up AT&T anyway in 1984, opening the long-distance and equipment manufacturing businesses to competition. It was traumatic for us.  It was complicated.  But the job got done, and today’s telecom industry is much more competitive, innovative, entrepreneurial, and a lot cheaper than it would be if we still had one grand national monopoly.

powerlinesWouldn’t it be nice if the same thing happened with electric power in Arizona?  It could — but not until the ACC opens another docket and attacks those “legal issues” anew.

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*Correction: As shown on the ACC website, ACC regulates rates for APS, but on SRP, ACC is only involved when SRP wants to build large power plants (100 Megawatts) or very high voltage transmission lines (115 kVolts.)  ACC also regulates Tucson Electric Power (TEP).

** Regarding good intentions:  A look at the SRP and APS websites will show that these utilities are indeed responsible corporate citizens, offering ratepayers tips, a choice of rate plans, rebates, and other assistance to help customers lower their electric bills. Both utilities and their employees are involved in conservation, and I know first-hand of their contributions to public education in Arizona. But business is business, and there’s nothing like the pressure of competition and the incentive of higher profits to drive a company to run the most efficient operation and offer the lowest prices possible.

Proposition 204 Hurts Arizona’s Middle Class and Low Income Families

 

Proposition 204 disproportionately hurts Arizona’s middle class and low income families

What is a regressive tax? Simply, if a taxes’ burden falls more on the middle class or the poor than those who are wealthy, the tax is considered regressive or disproportionately punitive on those who can least afford it.

Proposition 204 is the perfect example of a regressive tax, targeting those Arizona families that can least afford to pay more for the goods that they need. Proposition 204 makes Arizona’s “temporary” sales tax “permanent,” making Arizona the second highest sales taxed state in America. Incredibly, the only state that has a higher sales tax is Tennessee, a state with no income tax.

Proposition 204 is marketed for education, but the revenue raised is not required to go to teachers or the classroom. In fact, the measure is a grab bag for special interest groups, containing over $100 million dollars for public transit and roads. So, while Proposition 204 contains money for politically connected special interest groups, the revenue raised is coming from those who cannot afford to be politically connected.

By their very nature, sales taxes are regressive because expenses such as clothing, shelter, food, and other household goods tend to be the primary costs of a middle class and low income households’ budget.

That’s why opposition to Proposition 204 is coming from all sides, from those who know it is bad for business and job creation and from those who know it will hurt poor Arizona families. Why are we “permanently” raising taxes on those people who can least afford it? Why are we “permanently” increasing taxes during a time when Arizona’s unemployment rate is still high? Why are we raising taxes under the auspices of education, but sending that revenue to groups not related to education?

There is nothing more important than the education of our children. Arizonans want a bright future for their kids and improving education is an important priority. But, we need real education reforms, not permanently mandated tax increases devoid of independent oversight or accountability.

Proposition 204 is bad for Arizona middle class and low income families, it is bad for teachers, and it is bad for Arizona’s economy. We need to Vote No on Proposition 204.

To learn more about Proposition 204, please visit our Website or our Facebook Page for more information.

There is nothing more important than the education of our children. That is why we oppose Proposition 204, a broken promise to make Arizona’s temporary tax increase “permanent.” Proposition 204 brings a permanent, billion-dollar-per-year price tag to Arizona families. While raising your taxes, Proposition 204 provides no real reform and contains no real accountability.

Arizonans want a bright future for their kids and improving education is an important priority. Although wanting to improve education, throwing money at the problem is not the answer. We need real education reforms, not permanently mandated tax increases devoid of independent oversight.

Additionally, Proposition 204 was written by special interests for special interests.

While Arizonans continue to struggle, do we really want to continue to raise their tax burden? Are we willing to have the second highest sales tax in America?

Arizona needs real education reform and jobs. Proposition 204 will make Arizona less competitive while providing very little benefit to Arizona’s education system.

Proposition 204 is too taxing on Arizona families, Vote No on 204.

 

200 Local Small Businessmen and Businesswomen Support Dave Sitton

March 21, 2012 (Tucson, AZ) – A list of an additional 100 local small businessmen and businesswomen supporting Tucson businessman Dave Sitton was released today, bringing the total number of businesses supporting him to 200 and affirming that he has the trust and support of the business community. On March 1st, when Sitton released his 10 Point Plan for Jobs and Our Economy, he also released a list of the first 100 local small businessmen and businesswomen supporting him. In just three weeks, that number has doubled confirming Sitton as the candidate with the long-term ties to and involvement with Tucson’s business community.

“Our economy is driven by small and medium sized enterprises, representing the backbone of our free market system and employing tens of millions of people,” Sitton remarked. “I’m grateful to have the support of so many of our community’s small businesses which run our economy. The names you see on the list are names you know. They’re names you’re familiar with. They’re names you trust because you grew up with them. To have them step up to the plate and put their names out in public supporting my candidacy means a great deal to me. I have been a small business owner and a central component of my campaign is about job creators and the growth of our economy. When elected, I pledge to do all that I can to give small businesses the support they need so that they can grow their businesses, create more jobs and continue to make the American economy the envy of the world,” Sitton concluded.

For more information visit www.davesitton.com

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Phoenix Union Intimidation: It Can Happen Here

 

A new video from Progress Project was shown at Western Free Press. The video highlights the stalking, intimidation, and eventual shooting of non-union business owner John King. Do you think this could happen in Phoenix?

http://www.youtube.com/watch?v=NXRpY8V8jbo&feature=player_embedded

Please visit Western Free Press for more information