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Natural Monopolies: Is it ok to 'Own It All?'

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Nevelyn Black's picture
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Nevelyn Black is an independent writer with a background in broadcast and a keen interest in renewable energy.  In the last few years, she transitioned from celebrity interviews and film shoots...

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Creating monopolies at multiple locations is the name of the game for Hasbro’s timeless board game, Monopoly.  Game rules allow utilities to be sold to any player as a private transaction for any amount the owner can get.  While not as glamorous as Park Place, utilities collect rent 4 times the number on the dice which landed the player on the space.  But if both utilities are owned, rent is 10 times the amount shown on the dice.  Sound too steep?  Matching the game's official slogan to 'Own it all!', bankrupting other players is the main objective and the best way to win.  In reality, some have accused utilities of abusing their natural monopolies and violating consumer protections.  235 organizations have submitted a petition asking the Federal Trade Commission (FTC) to open an investigation into investor-owned utilities and what they have deemed as anti-competitive and abusive business practices.  On Last Week Tonight, comedian John Oliver roasted utilities saying, “Just Google your utility company right now and the word scandal, and chances are they’ve gotten into some major trouble.”  

The 235 organizations interested in opening an investigation have specifically asked the FTC to explore “unfair competitive actions that harm clean energy competitors, including consumers generating their own renewable electricity” and “unfair and deceptive acts, including corrupt dealings and voting interference, that enrich utilities and ultimately drive up consumer electricity rates and decrease consumer choice.”

Previous monopolies to fall under scrutiny and become dismantled date back to the late 1800’s with John D. Rockefeller’s Standard Oil Company and the American Tobacco Company.   The creation of antitrust regulation in the United States, in the form of the 1890 Sherman Antitrust Act, led to the eventual dismantling and restructuring of both companies by 1911.  Andrew Carnegie’s Steel Company (now U.S. Steel) was also forced to divest.  Among the most famous of monopolies, AT&T was divested in 1982 after the U.S. Department of Justice brought suit against the telecommunications company.  AT&T was accused of monopolizing the American telecommunications industry, preventing fair competition.  The United States Post Office (USPS) has a legal monopoly over various types of mail but remains challenged by a decrease in volume.  E-commerce continues to provide plenty of competition for USPS. Other countries have privatized their mailing systems and opened them up to competition.  Should investor-owned utility companies be forced to follow suit, being dismantled and restructured?  

Recent developments within the market include, a report by Deloitte listing ‘enhanced competition’ as a growing trend for the utilities industry.  This trend is spurred on by new regulations like FERC’s Order 2222 that opened up the market to smaller firms.  Also important to note, are the 17 states plus Washington D.C. in deregulated markets where customers can choose from several different providers all competing for business.  However,  the great economic power that monopolies hold has also had positive results.  The high costs of entering the industry make monopolies beneficial for regions looking to strengthen or build its infrastructure quickly and efficiently.

In conclusion, it’s safe to say, that 'there is little to no chance that this board game space will pose a threat during game play but can provide a steady source of income that pays for itself quickly.'   In reality, the Federal Energy Regulatory Commission could increase regulation of the grid through its federal oversight, as could state regulators, explained executive director of the Energy and Policy Institute, David Pomerantz.  How could the country’s larger utility corporations, Berkshire Hathaway Energy, Exelon, Duke, Southern Company, and American Electric Power, be impacted?

 

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