“Guaranteed profit” should be an oxymoron. After all, if there is no risk, there should be no profit. Reward is meant to follow risk. Utilities are where this gets weird.
Over the past several years, Central Maine Power Co. has had a bit of a PR problem. Some of the knocks against them are unfair. Others are well-deserved. It has culminated in an effort by some legislators to take the assets of the company.
You’ll probably want to check your freezer.
CMP ultimately fixed the computer bug and got the power back on. They corrected course and did a decent job providing updates on when customers could reasonably expect the power to return.
Power lines power lines converge at a Central Maine Power substation in Pownal. (AP Photo/Robert F. Bukaty)The ongoing strife between elected officials and CMP will soon kick into an even higher gear with reports that CMP’s parent company is exploring a multibillion-dollar merger. But the reason the strife exists in the first place is because power distribution is a “utility” subject to significant regulation.
By law, the Maine Public Utilities Commission controls the rate that consumers pay for their power delivery. It is, quite literally, price-fixing. The math includes a profit margin for the investors who own the lines, trucks, and substations. And, because their profit is subject to government control, government officials want to control that profit by taking over their assets.
It is a strange amalgam of the “big bad” often seen from opposite political perspectives. The left generally decries “big business.” CMP probably fits that bill. The right hates “big government.” You would think that a government agency determining, with the force of law, a business’ profit margin would qualify.
However, now there are calls to bring yet another industry into this strange, government-sanctioned monopoly system. Cable companies in Maine didn’t follow CMP’s footsteps in providing an address-by-address expectation on when internet service might be restored. To fix that, editorial pages in the Maine Today newspapers called for (possibly) placing cable providers under the thumb of the PUC.
The argument is well-intended. Cable companies are major internet service providers, internet service is critical for many to function in the modern economy, therefore it is a necessity like power and should be regulated accordingly.
The problem? The way we regulate power distribution just seems to make everyone equally unhappy.
In some ways, this is simply a different spin on the former “net neutrality” debate. Yet it fundamentally misconceives what the internet is. For most consumers, electricity is electricity. The power that goes to your lamp is the exact same as the power that goes to your furnace.
The internet is different. “FaceTiming” requires more bandwidth than checking an email account, and “streaming” television needs even more. As technology has progressed, more and more options come to the market to obtain that bandwidth. Cable companies are certainly big players. So are phone companies, both with landlines and through cellular networks. Satellite companies compete in the space as well.
It is a little bit funny. Cable cut its teeth bringing broadcast television into people’s homes. They grew, added “cable-only” channels, and captured a large part of the market. They gained revenue by bundling many channels together for a single payment. Now, people are dropping their cable television in favor of broadcast. And to buy a la carte internet streaming services like Netflix, Hulu, and Disney+.
Cable companies are certainly not perfect organizations, nor are they benevolent. But they do have a profit motive, and they are competing in a changing market. If they fail, they fail. Someone else will take their place, and consumers will have another choice.
Or we could regulate them like CMP and grant a government-mandated profit margin. And, in 30 years, we can have a big political fight over seizing their assets. What could go wrong?