Utility Abuse Shortchanges Consumers

The following op-ed by T. Boone Pickens ran in the Statesman-Journal on Friday, December 6:

Since adoption of the Public Utility Holding Company Act in 1935, a compact has existed between utility companies and the citizens they serve: The company gets a monopoly within their area, and, in return, must provide service to everyone at government-approved prices that allow the company to recoup capital and operating costs and also earn an agreed-upon profit.

This basic arrangement for government-sanctioned monopolies has been applied for decades to cable television, electricity, home telephone service and natural gas companies. Customers – or “ratepayers” – are guaranteed access to services at a regulated price, and monopoly companies are guaranteed a profit.

Regulated monopolies are not ideal – robust competition is much better for consumers – but with government oversight to keep companies “in their lane,” such arrangements have served consumers reasonably well. Problems can arise, however, when monopoly companies veer outside their lane and expand into other, already-competitive industries, ultimately undermining the very competition that benefits consumers. You see, these companies have a big edge over businesses that don’t enjoy the luxury of a guaranteed profit. With that kind of uneven playing field, competition and consumers’ choices rapidly dwindle and disappear, and the monopoly company is soon the only choice left.

Unfortunately, Northwest Natural (NWN) – the natural gas utility – is petitioning the Public Utility Commission to allow the company to expand its monopoly beyond delivery of natural gas to homes and businesses to the operation of compressed natural gas (CNG) vehicle fueling stations – a prospect Oregonians should view with great skepticism.

While NWN’s guaranteed profit creates an obvious income advantage, it also means NWN doesn’t face risk the way other companies do. For most companies, investment decisions are critical to success or failure. But NWN is protected from risk by the safety net of its ratepayers.

Setting aside the guaranteed profit, NWN’s natural gas monopoly impedes competition in other ways. NWN buys natural gas from suppliers at low wholesale prices but companies operating CNG fueling stations in Oregon are required to buy natural gas from NWN at retail prices. This requirement ensures NWN will profit from every CNG station in the state – including “competing” stations – while also guaranteeing the monopoly the ability to undercut competitors’ prices at the pump.

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