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Business support for public power raises red flags

Steve BucksteinQuickPoint!

The failure of so-called electricity deregulation in California and the bankruptcy of Enron Corporation have led to calls for public ownership of Enron subsidiary Portland General Electric. Some businesses have jumped on the bandwagon, including large electricity consumers such as computer chipmaker Intel.

Public ownership proponents argue that government can provide cheaper electricity because a public entity won’t owe taxes, and won’t have to earn a profit or pay shareholder dividends. However tax exemption simply shifts the burden elsewhere. More importantly, the drive for profits is healthy: competitive private owners must satisfy consumers and the level of profit is a strong signal of consumer satisfaction.

Individual electricity consumers should realize that big business often benefits from government ownership and regulation. In politically controlled industries, businesses lobby to get rules and rate structures that work in their favor. That’s what happened in California when, instead of deregulation, politicians restructured the electricity industry with new regulations that created opportunities for fraud and abuse.

Companies like Intel should also rethink their support of public power. Consumers who believe that prices are cheaper without the profit motive might later decide that computer chips would be cheaper if produced by the government too. Of course, in reality publicly owned chipmakers might still be struggling to produce slow 386 computers. Pentium processors would be many regulatory hearings and elections away.

Rather than go backward toward government ownership, we need the wisdom and courage to go forward toward truly deregulated energy markets. Capitalism works, if we only let it. Just ask the very profitable Intel Corporation.

Steve Buckstein is senior policy analyst at Cascade Policy Institute, a Portland, Oregon based think tank.

© 2006, Cascade Policy Institute. All rights reserved. Permission to reprint in whole or in part is hereby granted, provided the author and Cascade Policy Institute are cited. Contact Cascade at (503) 242-0900 to arrange print or broadcast interviews on this topic. For more topics visit the QuickPoint! archive.

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