Within the free-market community, there has been a long running debate about government enforced common carriage for energy network systems (i.e. allowing every electricity producer to use the existing energy transmission infrastructure, regardless of their ownership stake). Some see this as a step toward a free market. Others see it as an expansion of regulation. The difference in premises seems to be whether there are “natural monopolies” or not. The argument for (government forced) mandatory access rests on the assumption that in certain areas of the economy there is no possibility of competition without government action. Those who argue that there are in fact no natural monopolies see competition as a better regulator than government mandates.
It is argued here that the removal of monopoly privileges would make the owners of energy delivery networks more amenable to sharing those networks in order to stifle the threat of entrepreneurs creating competing network infrastructure. We have a case in point where the forced access chickens have come home to roost. Mandatory carriage has created an image of the market as seen in a carnival mirror.
A company called Georgia Solar Utilities is promoting legislation in Georgia asking to be granted all of the rights and privileges given to the regulated utility, Georgia Power.
These include access to the use of the transmission and distribution systems within the state and access to capital at the same rates as obtained by Georgia Power. Calling itself “GaSU,” the company wants to have existing electric distributors use their billing systems to collect from its retail customers.
Needless to say, this proposal will not sit well with Georgia’s 90 or so existing electric distributors. This amounts to retail wheeling with forced access to the facilities owned and operated by others. This proposal is the logical outcome of the flawed policy of forced access.
Years ago there were business arrangements for the mutual use of network systems that developed in an atmosphere that respected property rights, upheld the sanctity of contracts and required no regulatory edicts. In Georgia, retail rivals jointly owned the two pipelines that carry petroleum products because it made good business sense not to develop duplicate pipelines.
Later the electricity distributors followed suit, voluntarily developing a system of joint use for the high voltage transmission system. Each of the users of the Integrated Transmission System, “ITS,” contributed the components of the high voltage system they already owned. Now the members pay jointly for expansion and use of the ITS. Because they own this infrastructure, it is not available to others without their consent. This is private property and must be respected as such.
At the time the ITS agreement was being made law and began operating, 1974, the fateful AT&T litigation began. The famous Judge Harold Greene’s decision broke up AT&T, and created the “Baby Bells” and granted access to other parties to use AT&T owned facilities – hence the birth of MCI and Sprint. This policy is wrong, very wrong, but replaced the voluntary mutual use of networks developed in the free market. The defective telecommunications open-access model was followed in natural gas pipelines and electric delivery systems. Now, the blowback from the policy shows up in the outrageously presumptuous demands of GaSU. There are a number of non-utility power generators already operating in the state with more planned. These developers sell their output to one of the members of the ITS, and the exchange takes place at the entry point to the transmission system. The ITS distributor then takes the power to customers. There is no legal reason GaSU cannot sell its generation output to one of the many power distributors in Georgia. Georgia Power, the municipal and coop electricity sellers in Georgia, are also supplied from out-of-state utilities and power marketers. These transactions, thankfully, require minimal involvement of the state utility regulators.
Even some end-use customers have access to the power marketer through their local distributor. Muni’s and particularly coops can offer to allow a customer the choice to make his own deal with a power marketer, and the distributor acts as agent for the transaction. We call this a “willing buy-thru.”
So, without socializing the grid, throwing out property rights and extending the cronyism of the utility regulators to other market participants, GaSU can sell power in a market environment to a party that has access to the ITS. Further, GaSU can negotiate with any of 90 distributors to sell its power retail.
We don’t need to employ government solutions to every perceived problem. Rather than spreading monopoly privileges to others, we need to be abolishing them. Georgia’s oil pipeline and high voltage systems were developed through market relationships. Extend the market, not the monopoly!
Jim Clarkson has over 4 decades of professional experience in the energy management industry. He is the President of Resource Supply Management (RSM) Energy, an energy management and procurement company. Jim holds a Bachelor of Science in Industrial Engineering, a Masters in Business Administration and has Professional Engineering Licenses in Georgia, South Carolina, and Alabama. He provides services to industrial and commercial users, has extensive expertise in rate design, cost allocation, risk management, sales contracts and energy saving programs for large energy users.