MONOPOLY, MYTH & MONEY

Allan Maki, a graduate of Yale University and former practicing attorney, is executive director of the Southeast Missouri Regional Port Authority, a position he has held since 1988.

The Cape Girardeau City Council, sometimes maligned for fractious infighting, resolved its internecine issues last Tuesday night and found common cause. The Council voted unanimously to recommend to the Governor that he veto recently passed Senate Bill 221. What issue could bring about such unity and vigorous opposition? ENERGY. Senate Bill 221 is the latest version of the Utility Companies' plea for yet more protection for their monopoly. Welcome to the Utility Company Profit Protection Act of 1991.

SB 221 is a long and complicated rewrite of several previous utility regulation laws. One of its main thrusts is to change the scope of existing law, which has come to be known as the "flip-flop law." This legislation makes it extremely difficult for anyone who is receiving energy from a utility company to change to another supplier of electrical energy.

As an added hurdle the PSC was prohibited from permitting such a change based upon the fact that an alternative supplier of energy might be less expensive. In other words, you would not be permitted to "flip-flop" over to another utility company just because they offered better rates.

It is ironic that the PSC cannot consider rates when looking at electrical suppliers. Lower consumer rates took a back seat to protecting existing utility company investments. SB 221 is an anti-competitive, anti-consumer law.

Recently the City of Jackson won a lawsuit against Union Electric (UE). Jackson has a municipal utility; it generates some of its own energy and buys the rest on the open market. The City of Jackson annexed additional land, incorporating buildings previously serviced by UE. Jackson wished to add these customers to their city-owned utility system. UE was unhappy at this loss of customers and invoked the "flip-flop law". The courts held that the "flip-flop law" did not apply to municipal utilities or other suppliers of electricity, such as the SEMO Port Authority.

Jackson, Sikeston, Springfield, Poplar Bluff and Columbia all have lower utility rates than Cape Girardeau. All have municipal utilities; none are currently under PSC control.

SB 221 was introduced in part to overturn this court decision. I hope you like Union Electric, their rates and service, because while you weren't looking you were just married for life. Even while UE was negotiating a franchise agreement with the City of Cape, UE's Jefferson City lobbyist was pushing this bill, which effectively removes from the city and its citizens any choice in the matter. SB 221 presents a direct conflict between the city of Cape Girardeau's power to award an electric utility franchise and the protection afforded UE under this bill to keep all of Cape's customers, franchise or not.

A primary impact of this bill will place city-owned utilities and port authorities under the control of the PSC. This bill will prohibit a more economical source of energy (e.g., a new utility) from ever supplying an existing structure currently supplied by UE, or by a co-op, and so it discourages competitive rates. The only monopoly here is on utility company rates, profits, and your wallet.

In support of this legislation, utilities cite the longstanding justification of "convenience and necessity." This is an anachronistic justification originally designed to require utilities to reach out into rural and low-service areas in exchange for exclusive rights to customers and a guaranteed return on capital investments. Anyone who had a need was to be served for that customer's "convenience." A review of SB 221 reveals the new interpretation of this policy: it is now for the "convenience" of the utility, not the customer; and for the "necessity" of protecting the utilities' investments, not the consumers' rates.

We are told that utilities are a "natural monopoly." The "natural monopoly" theory rests on the notion that only certain qualified, substantial parties have the capability and expertise to provide reliable public services. In order to encourage the continued provision of services, these entities (telephone, air, trucking, energy) were given exclusive service rights and guaranteed returns on investment. When a vital service is required for the public good and the industry is in its infancy, perhaps a case can be made for temporarily protected markets to encourage capital investment. But when such industries mature, this protection can be counterproductive reducing productivity, stifling innovation, and increasing costs. When was the last time your utility rates went down as a result of better productivity, innovation, or cost-cutting? When was the last time your rates went down, period? We should enhance not restrict competitive opportunities. The logic of this is evident and has demonstrated its payoff in the deregulation of airlines, trucking, and gas industries, and in the de-monopolization of the telephone industry.

During his singular voyage aboard H.M.S. Beagle, Charles Darwin observed that there are no natural monopolies only dynamic competition. A note of caution: To restrict entry by energy providers as SB 221 does goes against nationwide trends, and it will hurt Missouri's position in economic development.

SB 221 makes it all but impossible for cities to grow through annexation, or to create or expand municipal utility systems. The utility companies seem concerned that they won't recover their capital investments in the event of competition. Have the utility companies forgotten about the U.S. Constitution and Courts of Law, which prohibit unlawful taking? What can it be that they are afraid of: Competition? Free market forces? A routine judicial appraisal of value by a court? Was it necessary for the bill to require a 400 percent penalty if a city wants to acquire utility property?

As a final comment, it should be noted that the recent improvements in American business have come from increases in productivity and innovation - driven by international competition. A great hue and cry has been raised by the U.S. concerning Japan's protection of its rice industry. We complain that Japan needs to open up this "natural monopoly" to competition. Japanese pay three to four times world rice prices to preserve this "national interest." Upon close inspection, this "national interest" is driven by the powerful rice growers' lobby.

Perhaps we should not cry so loud at this practice, as Missouri now attempts to close its energy market to outside competition. A powerful lobby seeks to insure its position and prohibit any new players in the game. The funny thing is that the consumer was never asked. This is a Neanderthal mentality harmful to Missouri and Missourians. The veto suggested by the City Council seems the best course.