Sorry I know its sacrilege to say but i think there's some things the government should simply just own. Water, energy, roads, transit etc.etc.etc... There's no advantages to bringing in private enterprise, at best they merely act as rent seekers, and at worst they strip the infrastructure of all value without any maintenance, getting taxpayers to build it again.
It should not really be controversial. Classic liberal economics (from e.g. John Stuart Mill and on) generally acknowledges that natural monopolies exist and that it's generally beneficial for everyone if they are publicly owned.
> A natural monopoly is a monopoly in an industry in which high infrastructure costs and other barriers to entry give a market's largest supplier an overwhelming advantage over competitors. An industry is a natural monopoly if a single firm can supply the entire market at a lower long-run average cost than if multiple firms were to operate within it.
I'm going to assume ignorance rather than snark here.
A natural monopoly is one where a product or service is:
- Widely considered fundamental to the public good (and in most cases, has very inflexible demand, meaning that people will often pay any sum to access it)
- Whose cost overheads are either fixed or grow slower than the variable costs (meaning that the investment required to scale the service not accounting for costs that scale with individual usage benefit from economies of scale)
- Easy to be gamed for profit in the hands of a profit-driven entity (either in the form of extortionate pricing directly, or cost-cutting on things like infrastructure maintenance; a good example here is how PG&E has infamously failed to maintained their power lines in California, leading to large-scale wildfires)
In the modern day, the best example of these are public utilities: water, power, road networks, public transit.
In these cases, the latter two points are used to justify public ownership, which in turn defeats the third point.
I know. The post I was answering to spoke about predatory companies that privatize the air and water of the world we were born into, or similar. Apparently it was edited to read more sober, which is good.
> Were you born into a world with electricity naturally occurring in sockets?
Massive swaths of the US required government action to get telephone and electric service. In many cities/counties, the city or county owns the power utility. In other rural/suburban situations the power utility is a non-profit cooperative that was encouraged/bootstrapped through low interest loans in the 30s and 40s. Telephone universal service was achieved because AT&T agreed to it in exchange for the government allowing it to be a (natural) monopoly
That's now what natural monopolies mean, "natural" alludes to the fact that by nature, only one company will be able to operate and maintain and other companies will be locked out due to barriers of entry or other complications. Look into it
No, but I was born into a world that requires a massive amount of collaboration, specialization, and mutual respect for one another to enable our society.
This is a wonderfully uneducated response to the above point.
Go google "natural monopoly" please. No one is arguing that work is not happening to provide a service.
We're arguing that capitalism clearly fails to achieve good outcomes for optimizing the quality and cost of that service in the case of natural monopolies.
To play devils advocate, in NYC which has a massive transit network. There exists a series of private transit "companies" (sometimes just a guy with a 10 person van), that provides routes that are poorly served by the publicly run transit network. The famous Chinatown buses would be another example, that run between Chinatowns in the North East, are incredibly cheap, fast, and are profitable.
This is a great example/argument for how a competitive local ISP market can work. The city/county/state should string fiber to every single house, and then various ISPs can just plug a customer into their particular switch/OLT/splitter.
A common "monopoly" of the physical last mile served by many providers traveling over it
It's not really devil's advocate, it's the way Capitalism should be structured. If we had government covered health care I'd expect private markets of vanity surgery or uncovered procedures to still exist. If we had government run utilities you'd still have private installments for demanding needs, generators, off-grid construction, etc, etc.
> To play devils advocate, in NYC which has a massive transit network. There exists a series of private transit "companies" (sometimes just a guy with a 10 person van), that provides routes that are poorly served by the publicly run transit network.
Tokyo uses privately run subway/train systems and is largely considered the envy of the world with regards to transit. The united states prior to WWII mostly ran on privately run transit systems, with private companies running street car and subway lines. So it does not appear to actually be that much of a natural monopoly.
They said transit as a class of natural monopoly and I showed a counter example where there are private companies entering a space where the natural monopoly already exists.
Hello from Québec! Yes, with the right structure and guardrails in place, you definitely get better costs for citizens and businesses. Citizens can also petition the government when something needs fixing, which is better than "fuck you if you're not a shareholder".
For an example of the opposite, you can unfortunately look at the Canadian telcom oligopoly.
Oh, they don't need to buy it, they already inherited from their rich parents. The world is just a set of trading cards to them at this point.
Elon Musk's fake money could buy a new $10 million mansion every single day--every single day--for THREE CENTURIES, and he wants more!
Society is delusional. We can't even collectively agree to tax psychotic money-grubbers who cannot even enjoy the fake wealth they have their names on.
This was the platform of Katter’s Australian Party.
Instead the Electricity Board got privatised with promises of lower prices. Electric prices tracked inflation and general cpi from when Queensland electrified until privitasation in 1997.
Since then prices have gone up about 75% beyond inflation.
I get it when there's an obvious natural monopoly, and an alternative is just infeasible to build.
I don't think it applies to electricity in many cases. If there are investors in building new electrical capacity, then it likely means that the area is underserved, and the prices are naturally higher. The government apparently did not build what the market is ready to pay a premium for.
The original Edison's electric company was private, and for-profit. It started selling electricity in 1882. I wonder how soon would a government-owned company manage instead.
I think there's some examples of a split model that work well, i.e. the grid is publicly owned but the retail functions such as metering, billing, and service connections are private and have competitive providers.
Consumer choice, or public good/public utility: Choose one.
A deregulated market should provide choice, if it provides monopoly the gov should step in either by breaking up (forcing choice) or making public (forcing good).
I don't think that contradicts what the person you were replying to said. Specifically, they said break it up or make it public. If there is no option to break it up, then making it public is the only option.
Personally, I would like to see more competition in some of those spaces. But if the government is going to enforce any sort of competitive restrictions, it should go all the way and own it. For electricity, they could own the transmission lines and allow competitors to generate and sell electricity. The government could then charge a fixed monthly fee per connection (based on capacity, so industrial users would pay a lot more than homeowners for their connections).
My last two energy providers have been coops. In north eastern California, the coop had one feed from PG&E and the other from a company out of Reno (I forget the name). It ended up being cheaper and more stable than PG&E itself.
People on this thread forget that when legislatures cut funding, governments also defer maintenance on the infrastructure; especially since you mention roads and transit: governments tend to underfund both of these. Private companies of course do the same when shareholders demand more profit. It’s the same.
The rest of your point I agree, but good maintenance is not a given regardless of private ownership or government ownership. In fact I would say this is part of being a monopoly: there are no competitors and no market forces to compete on reliability.
> good maintenance is not a given regardless of private ownership or government ownership.
Its not about maintenance, its about pure math and efficiency.
Natural monopolies have 0 advantage in terms of price discovery, therefore there are no market forces. And you get all the disadvantages of a monopoly without any of the advantages of capitalism.
Many purely capitalist countries still advocate for natural monopolies to be goverment run (Norway oil being public, Singapore owning all the land and housing, Spain having public healthcare) and all of those examples beat countries that have privately owned natural monopolies.
Cleveland has had two sets of power lines for a long time (despite FirstEnergy’s many attempts to shut down Cleveland Public Power). It’s not necessarily a natural monopoly.
Instead it one where incumbents try very hard to convince everyone it must be a monopoly.
I'd prefer them to be mostly municipal or collectively owned by multiple municipalities over making them state-owned. Obviously power generation is big enough for it to be state-owned to be a workable choice.
There is a lot of writing and philosophy on this exact issue - state owned enterprise, partial to complete deregulation, state operated enterprises, etc.
At the end of the day it will be about tradeoffs. CA/TX and others "deregulated" electricity by splitting the public-side (transmission and distribution) as heavily regulated from the generators and consumer purchasing sides. In TX, nominally, this lowered rates, though it has been some time since I researched this space. What it also did was cause pretty bad second order effects for transmission providers since they can't exclude use of their owned networks due to the physics of grids. It also caused underinvestment in the grid, causing the major freeze-outs and near-collapse of the natural gas delivery pipelines that made the news.
There CAN be advantages to bringing in private enterprise, but, they need fairly strict oversight to not cash out/distribute the funds needed for infrastructure O&M/new build to shareholders.
Most of the best public infrastructure is state owned but privately operated, like Sweden and Singapore’s transit systems. But the ownership model is less important than other things. Japan’s world leading training infrastructure is privately owned and operated. By contrast, almost all of the United States’s terrible transit systems are publicly owned and operated. Water is a public utility and almost all the United States and the water systems are in terrible disrepair.
The problem with public ownership is that it drives price is too low because it allows people to vote on prices. Your average age 60+ voter doesn’t care if lowering the water bill now means that the system will be in bad repair 30 or 50 years from now.
At the end of the day, there is no magic policy bullet to fix problems with the people. Public infrastructure in the US sucks whether it’s publicly owned or privately owned. But I bet if the Japanese trains were publicly owned instead of privately owned, they would still be pretty good.
My state deregulated natural gas which meant that despite the city owning the delivery and turning on and off the gas each for profit company had to have their own HQ, marketing budget, customer service, sales team, and C-suite.
The fixed service fee cost $40/month which was more than the natural gas consumed every month but Jan/Feb. They also make cancelling difficult, I was put on hold for 40 minutes without an music so I didn't know if I had been disconnected or was just on hold.
Electric is run by one company and their service fee is $15/mo. Their customer service is also much better.
Alberta's electricity system is Canada's example of this. "de-regulation" meant the separation of generation, distribution and retail. Decades after this was supposed to lower the price of electricity, it's done the opposite. Big corporations are now guaranteed a profit at each layer of the system. There is no competition, because why would they compete if they're guaranteed a profit?
So the result is Albertans pay more than most other Canadians for electricity. Even if the actual rate is low (which it isn't), the cost of electricity is usually only 10% of my bill. The rest is "transmission" "distribution" etc. It's insanely expensive compared to next door in British Columbia.
Electric production and transmission is interesting from an economic perspective, as the physical infrastructure is almost as perfect an example as it's possible to make for something which should be governmental (or under its direct control). You just can't get working competition there. While the power itself is the perfect example of the opposite, where the market should (according to theory at least) be perfect.
> While the power itself is the perfect example of the opposite, where the market should (according to theory at least) be perfect.
Markets don’t seem to want to solve for outlier situations like extreme weather events or significant hardware malfunctions. Basically I’m talking about what happened in Texas. When it’s a safety issue, it can be hard to align incentives to make planning for outliers worthwhile to market actors.
It’s more than that - it’s that if price is your only signal, it’s always going to be cheaper as a producer to ignore long-term sustainability, which means the companies which do so will “outcompete” the companies which plan for the future, leaving you with a market full of companies utterly incapable of handling an adverse event when it comes around. It’s not just greed, it’s a fundamental problem with how the market compresses signals about companies and products.
Transmission is privately owned and operated but publicly controlled. Like other natural monopolies, the regulator tells the operator what to provide and how much they get paid for it.
The main reasons for this arrangement are political -- debt stays off the government's balance sheet, and labour disputes aren't "the government's fault".
There's no reason for not separating generation, distribution, and retail.
Those are completely different activities, with completely different competency requirements, economical and political characteristics.
Also, bundling them is an anti-competitive measure. What is important for generation in particular, that is a competitive market where you can have private companies.
Hydro One in Ontario is infinitely worse and was a government spearheaded privatization effort. "Sorry, not sorry" from kathleen wynne still echoing in the ears...
Utilities should at minimum not have a profit motive involved, but the fact that we've been so happy to deliver vast profits to shareholders instead of proofing our grid has been a real tragedy.
Is there any way out of this "shareholder value" hell? The moment a company goes public they're legally required to make stupid, short-term decisions that are worse for everyone, even the shareholders? (unless those shareholders know _when_ to sell their shares)
> The moment a company goes public they're legally required to make stupid, short-term decisions that are worse for everyone
Nope there's no legal requirement. Management is happy for you to believe there is because they get paid in stock.
The only legal requirement is to make decisions that are in the shareholders' interests, rather than the management's. That means short-term-bad, long-term-good decisions are actually strongly encouraged.
The fact that companies are organized the way they are today is not some fact of natural law. There are legal structures of ownership that have been put in place by real people, which means there are the means to completely change those ownership structures.
Allowing outside shareholders in combination with private ownership is going to result in the kinds of short term thinking that lead to the "exits" and other profit-maximizing behaviors.
One "way out" is to make laws that give good public incentives / allow people to easily incorporate as organizations where the employees are the sole owners of the entity (co-op).
There needs to be regulation that discourages the behavior. Some ideas that have been floated include expanding corporate responsibility to include the workers and customers, loosening corporate responsibility laws so that companies don't have strong obligation to its shareholders, ending quarterly earning reports, reviving the ban on stock buybacks, etc.
No, because shareholders are the owners of the company. The legal requirement is more a fail safe than a mandate, because obviously the company wants to act in the best interest of the company. Without the legal mandate these companies would still almost universally act the same.
There are laws that a plumber can't come into your home and smash up your pipes. That law however is not the thing that prevents the plumber from doing that, the plumber naturally works in your common interest. It's the exact same with companies, shareholders elect a board who hires specialists to run the company. Notice the shareholders are at the top.
No. Public companies are absolutely allowed to engage in long term strategies like "don't burn the future and reputation of the brand to temporarily juice near-term profit". The reason they don't is because the people making the decisions don't care about the future of the brand and do care about near-term profit.
> Second, absent a limited set of circumstances as defined under Revlon, a board of directors, while always required to act in an informed manner, is not under any per se duty to maximize shareholder value in the short term, even in the context of a takeover.
It’s absolutely untrue. It’s why companies are legally allowed to burn money on questionable investments or donate to political candidates if their Boards are fine with it.
"Shareholder value" is just another way of saying return on capital. Do you want to reduce return on capital? (the answer could be yes or no, just advancing the discussion)
Or do you want to redistribute the ownership of capital?
You're missing the last bit - shareholder value is return on capital for shareholders
The interests of the shareholders diverge quite strongly from the interests of electrical utility customers. It is generally a parasitic relationship where they consume resources that could have been spent improving utility service for the customers, either directly via dividends or indirectly by avaricious behavior on the part of the company in pursuit of their stock price.
> The interests of the shareholders diverge quite strongly from the interests of electrical utility customers.
Unless the customers are the shareholders, as in a co-op. The article's data seems to show that co-ops provide the cheapest electricity, which makes sense because the owners are the same people as the users, so the incentives are aligned.
this is the key. Of course, investor-owned utilities will try to charge as much as they can to maximize return on capital. The major question is "do we want to maximize return on capital in our utilities?". I would argue the answer is no since providing utilities is a public good and facilitates all other activities in the society, and forms natural monopolies.
>Or do you want to redistribute the ownership of capital?
I think that's unfair. Do you disagree that companies who go public become myopic and attempt to extract more value until they've hollowed themselves out?
I would argue the effect is more pronounced in non-public companies that have private investors. Private equity especially does this, but VC backed startups also display extreme return on capital seeking behavior (albeit through growth rather than hollowing)
> Is there any way out of this "shareholder value" hell? The moment a company goes public they're legally required to make stupid, short-term decisions that are worse for everyone, even the shareholders?
Shareholder value (primacy) is one interpretation on the purpose of companies (and a relatively recent one):
* “Profits are to business as breathing is to life. Breathing is essential to life, but is not the purpose for living. Similarly, profits are essential for the existence of the corporation, but they are not the reason for its existence.” ― Charles A. O'Reilly, Lead and Disrupt: How to Solve the Innovator's Dilemma, https://en.wikipedia.org/wiki/Charles_A._O%27Reilly_III
* “On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy...your main constituencies are your employees, your customers and your products.”[72] — https://en.wikipedia.org/wiki/Jack_Welch#Politics
If you back to the mid-1900s US:
> In 1949 General Foods’ president Clarence Francis told Congress that he had a “three-way responsibility to the American consumer, to our associates in this business, and to the 68,000 [stockholders in General Foods]. We . . . would serve (the company’s) interests badly by shifting the fruits of the enterprise too heavily toward any one of those groups.” Two years later, the president of Standard Oil of New Jersey claimed that managers needed “to conduct the affairs of the enterprise in such a way as to maintain an equitable and working balance among the claims of the various directly interested groups—stockholders, employees, customers, and the public at large.” So widespread were such views that, in 1959, one writer in the Harvard Business Review complained that it was no longer “fashionable for the corporation to take gleeful pride in making money.” Instead, he complained, it was typical “for the corporation to show that it is a great innovator; more specifically, a great public benefactor; and, very particularly, that it exists ‘to serve the public’.”
> American corporate law has long drawn a bright line between for-profit and non-profit corporations. In recent years, hybrid or social enterprises have increasingly put this bright-line distinction to the test. This Article asks what we can learn about the purpose of the American business corporation by examining its history and development in the United States in its formative period from roughly 1780-1860. This brief history of corporate purpose suggests that the duty to maximize profits in the for-profit corporation is a relatively recent development. Historically, the American business corporation grew out of an earlier form of corporation that was neither for-profit nor nonprofit in today’s parlance but rather, served a multitude of municipal, religious, charitable, educational, and eventually business purposes in early nineteenth-century New England. The purposes of early American business corporations—rather than maximization of profit to private shareholders— were often overtly public, involving development of local transportation, finance, and other much-needed economic infrastructure. With the rise of factory-based manufacturing, railroads, and other capital-intensive industries in the middle decades of the nineteenth century and the advent of general incorporation statutes, the purpose of the American business corporation shifted fundamentally from public to private. By 1860, the stage was set for the modern firm.
> Michigan Supreme Court held that Henry Ford had to operate the Ford Motor Company in the interests of its shareholders, rather than for the benefit of his employees or customers.
> The moment a company goes public they're legally required to make stupid, short-term decisions that are worse for everyone, even the shareholders
The problem is a lot of companies functionally behave that way but there actually isn’t a mandate resembling anything like this, though it’s repeated so often I’m not surprised a lot of people it’s the case. Fiduciary duty doesn’t translate to “rip up and sell everything that isn’t nailed down, burn all your goodwill, and squeeze the shit out of everyone so you can extract every red cent as fast as humanly possible.” You are allowed to plan for the long-term. We just don’t and we create all sorts of incentives (bonus structures for instance) to chase short-term gains.
The investors aren’t going to rise up in all their fury and haul off a CEO to be guillotined because he invested in a project that spans more than a quarter. But unfortunately, plenty of businesses love operating as if that’s the case, because it gives an excuse to make quick dirty money. So they hide behind this erroneous perception of what constitutes “fiduciary duty.“ In the US’s particular form of capitalism it makes a lot of sense, even if it’s terrible for us as a whole.
Lately I’ve been starting to wonder if the world has changed in a way where long term planning doesn’t work anymore. If information and the reaction to it propagates so quickly that the world changes faster than your plans can adapt.
A long term plan for a company is _at least_ a decade. If your plan ended today, it started in 2016 so it has had to survive COVID, inflationary periods, several trade wars, the rise of AI and now the side effects of the war in Iran.
If your long term plan has to adapt to those in real time, is it even a long term plan? Or is it really a series of long term plans cut so short they became short term plans? I can see companies adapting to just drop the long term premise entirely.
Well, partly companies behave that way out of anticipatory obedience: if they were to really focus on the long term at the detriment of short-term profits, you'd bet that at least some (maybe influential) shareholders would protest. And partly of course the CEO's compensation depends on the shareholders being happy, not on the long-term viability of the company, so there's that...
Are there many examples of true private ownership? The power utility in my area is investor owned but publicly regulated. They cannot raise rates without approval from a public commission, and I assume are limited in other decisions as well.
- Some utilities consistently operate at significantly higher margins than the average. The top 10 utilities by average margin over 2021–2024 include MidAmerican Energy (27.22%), Florida Power & Light (23.51%), Nantucket Electric (23.24%), Empire District Electric (22.45%), Florida Public Utilities (20.35%), CalPeco (20.28%), Public Service Electric & Gas (19.44%), Duke Energy Carolinas (19.07%), Alabama Power (18.71%), and AEP Texas (18.63%).
Utility companies get local monopolies and in exchange their prices are regulated. Consequently they have moderate but stable, essentially guaranteed, returns.
I have literally provided you reports and company names. If you don't like the data, or don't believe the data, reconcile internally. UtilityDive is an industry publication, the financials are public.
I can't address these because most are part of larger orgs, so I am not sure where they are getting their numbers from or how they are constructed. But someone else replied with tickers (including parent companies of the ones you named) and I addressed those.
You haven’t provided the relevant metrics to address their WarmWash’s claim. If the utilities are earning outsized profits, then their shareholders would be earning outsized returns.
Comparing long term returns using a website like this would help figure out if the businesses are over performing.
Outsized profits does not necessarily mean it flows through to shareholders. That's a management choice. You can be very profitable and not buy back stock or issue dividends.
If you are insinuating corruption, then no discussion can be had since no numbers can be trusted. If there is no (or sufficiently little) corruption, then shareholder returns would be a reflection of the business’s profitability.
Call it what you want, these are unnecessary margins that should be crammed down. Regulation, nationalization, I am not picky how. Whether shareholders are seeing outsized returns from the regulatory capture, also not too concerned about.
I am fairly confident the cohort of those who support investor owned utilities are a vocal minority.
For all the non taxpayer owner utilities I am aware of, the margins and utility prices are completely controlled by government employees. Government employees that are hired by leaders that voters vote for.
Note that there exists the same incentives for publicly owned and investor owned utilities of voters today wanting lower utility prices at the expense of future utility customers by keeping capital expenses down today.
>I am fairly confident the cohort of those who support investor owned utilities are a vocal minority.
I will be the first to support only publicly owned utilities. But that has nothing to do with using bad logic and numbers to determine outsized margins.
As interest rates go up, investor owned utilities increase their rate of return on equity ask, pushing up consumer electricity prices. A baseline of consumer electric demand is inelastic, and required for life.
I find it a somewhat humorous issue because most of the US landmass is covered by publicly owned electric utilities already. Investor owned utilities cover more people (Arizona, California, New York, Florida, Maine, Northern Illinois up through Wisconsin to the Michigan UP, primarily), but in smaller (relative) geographic areas.
The only real proofing of the grid is distributed generation and neighborhood microgrids. Centralized generation with distant distribution is subject to single point failure with widespread impact.
Yeah, they should be like those nonprofit hospitals.....
Which is to say if the solution was that simple and the fruit that low hanging it'd be done already.
At the end of the day whether profit or not the problem is that there's no consequences for sucking and no reward for not sucking. Government agencies tend toward fiefdom expansion, amassing power and graft. For profit entities tend to try and create situations where they can extract rents on the flimsiest of pretexts. They both seem to suck for energy though perhaps government sucks a tiny bit less. Neither "solves" the problem because neither seems inclined to steadily march toward cheaper/better/faster/whatever-er energy. They both seem to try and increase the suck if left to their own devices.
I guess it depends how you fund the system then. If there are not 'profits', how would additional infrastructure and upkeep be done, without just raising rates higher to pay for it? And who would loan them the money? The government? Oh, so back to taxpayers.
Some use a lot more electricity than others (think companies and industries)
Public utilities receive unfair advantages like preferential financing, tax exemptions, and government infrastructure grants in your definition of subsidies, public utilities frequently receive some form of government support. (unfair as in not apples to apples comparison)
> Some use a lot more electricity than others (think companies and industries)
Okay sure, and if the utility is public, the public should get to set policies accordingly.
> Public utilities receive unfair advantages like preferential financing, tax exemptions, and government infrastructure grants in your definition of subsidies, public utilities frequently receive some form of government support
Unfair to who? Somebody who wanted to profit off the public? As a member of said public, excuse me for not being the most empathic towards people trying to make a buck off me.
A middle man that can bail out of consequences for free, while the public can never bail out of obligations and needs. There was something in game theory about such sequential games where one side can only loose if it plays.
This whole "but government is inefficient" argument has never convinced me. Our local electric provider has as bad or worse bureaucracy and ever-increasing rates. Bureaucracy is just a symptom of aging human systems, and it can be fixed. Monopolies that serve the public good should never been profit driven, full stop.
One of the great acts of human creativity has been to convince the masses that if you install a bunch of middlemen who are looking to profit, goods and services will be cheaper and better.
I think part of the success of this message is that it’s so obviously silly that people feel silly questioning it.
It might come from other factors than aging. The incentives are different and the way the structure evolve too. In public institutions, political tempo affects operations.. every new head of minister will reorganize things for a short while and then issues start showing up, until the next election. It makes people unable to care for efficiency after a while because they know how often friction will grow again.
Maybe small difference in finances too, very often public sector struggles with basic tools. I "feel" that private sector is a little more prone to renew that part (to satisfy the efficiency gods). That said it often backfires because they will also replace perfectly good tools or software to get the latest shiny.
Then there's mass.. but large private corps will have the same issues.
Also this is not the sole purpose of companies.. SpaceX is a trillion dollar company with 0 profit.
The free market has created everything you use the more we turn the keys over to government's the worse things get.
Companies can't get infinite profits because they will be undercut by other companies COMPETING. The government can get infinite power and control though.. they have no competition.
To establish justice, ensure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty.
> Also this is not the sole purpose of companies.
Friedman disagrees.
> The free market has created everything you use the more we turn the keys over to government's the worse things get.
Which is why we have never needed government regulation of things like food, air, water, shelter, work safety, accessibility, or anything else. The free market provides.
> The government can get infinite power and control though
Which is why in a free society the government is answerable to the people.
Capitalist using money to buy capital and then sell services, brilliant.
Government using money to buy capital and then provide services, deadly socialism.
It's always just been about capitalists wanting less competition. That's why they don't want the market to decide and fight for laws to literally outlaw stuff like municipal broadband. If they are so much more efficient, they should be able to offer an equal or better service for the same or better price.
They have so much accountability. Everything is in public for inspection, they're subject to elections happening whether they like it or not, they have to follow strict laws and can be sued or even imprisoned, there's oversights and review boards. Depending on the position there's even television cameras broadcasting their work live. You can just walk in and sit down on them. There's far far more accountability...
In practice what the "small government" ideology actually does is get rid of these accountability mechanisms and put scammers and corrupt people in charge instead.
What are you talking about? I can vote out my government leaders in a democracy. I can't vote out Mark Zuckerberg or Elon Musk that run their organizations autocratically.
This feels like kinda of a useless comparison if we don't know about the tax rates they pay, cost of capital, adjusting for geographic location and local regulations etc. I.e. the largest increase was seen in NY where it is really expensive to do anything and high taxes.
Yup, tax exceptions, cheaper financing or even government financing. It's like letting the referees play the game and then pointing out that they make more free throws.
Removing the rent-seeking middle-man class generally brings in savings. Same with healthcare.
Also the "refs" should be in charge. That is to say the working class are the refs and they should be able to build infrastructure without the capital owning class inserting itself as a rent-seeker between them and these services.
I live in a counter-example. The only water and electric utility available is city-owned and I pay triple the amount of my sister and her family that lives in another city yet has 4+ private utility companies all competing with each other. And she has a house more than twice the size of mine!
How does this system of private competing water companies actually work? Do they each have their own exclusive reservoirs and mains transmission system and water pipes right to their customer's houses/premises? And their own exclusive sewerage systems and treatment plants?
Or are they just reselling access to some ahared legacy infrastructure? In which case any "competition" is very likely an illusion.
There is only one public water system, every house connects to it. The state tasks specific companies with its maintenance (these are often not utility providers themselves, just construction/maintenance companies).
Consumers attached to that system have a metered connection, but water just flows as long as there's enough overall. Your utilities company doesn't have to move any physical water at all. They just have to eventually "settle" the amount of water that they sold to their customers. They do so by buying and then forwarding options contracts.
The electricity and gas companies are the same. They compete on
- trading (who knows best when to buy how much?) and
- consumer-facing marketing
This is how a lot of the modern economy works. Through the power of abstraction, you can run an online store without producing or shipping any items yourself and a delivery restaurant without cooking any meals.
I imagine this works just like with electricity. You have generation capacity, with commercial entities buying or owning generation capacity and selling the resource to consumers through community owned last mile infrastructure. The sellers need to tally up and reconcile/settle their generated capacity at some frequency (not sure if daily, monthly, yearly).
utilities don't generally "compete" with each other like how most business do - becauase that would mean they own redundant infrastructure. They are more like localized monopolies, because there is usually only 1 that operates for each given address.
What are the two cities? You'd need to control for a lot of factors to figure out if the competition is the reason or the local market rate is just lower.
Name the city because this makes no sense. You claim private utility companies are actually installing infrastructure? Or are they just resellers that provide nothing?
The only reason cities are having issues with water and electricity is because we cut taxes on the rich. Wages went down and service quality got cut to make the CEOs richer. The US has been coasting on all the infrastructure built in the 50-60s when we had a 90% federal income tax rate and CEOs were capped at making the 2026 equivalent of 5 mil a year. Tax dodging was stopped, everything was funded and life was affordable.
Generally that's not true. Its weird people feel like they must mention any exception. Its the same as "I know someone who lived to their 90s and smoked everyday, so what's wrong with smoking?" People are aware exceptions exist and it doesn't really add anything to conversation to keep bringing them up.
Utilities are one of the cases where market dynamics break down. It's very obvious why, when you realize how difficult it is build even a relatively simple electrical transmission system, or a power plant. The barriers to entry are extremely high.
Furthermore, switching from one provider to another is inherently difficult. There is only one set of pipes leading to your house, how you going to switch to an alternative? Who is going to build the line for the 1 new customer?
And finally, splitting the business across the vertical doesn't work either. Generation of power is tied to grid management, this is tied to transmission maintenance and expansion.
All things considered. Monopoly emerges naturally and rent seeking is pretty much given. There are only two options left. Either the utility is operated by government for common good, or it the monopolist is so heavily regulated and controlled by the government, that it is, in effect, its extension.
That's why most power utilities in the US are considered regulated monopolies. They are owned by shareholders but any changes must be approved by their public utilities commission first.
My electricity is produced by a cooperative. The coop has some 60k participants. And over the year it's managed to build and operate a respectable amount of wind turbines and solar installations, and it's now expanding into district heating and battery storage.
They're producing some 100GWh/year. Which is not half bad, considering they're typically at or below market price and often pay a ~6% dividend.
I think your case is unusual? Co-ops I am familiar with usually don't own generation, they buy power from a regional generator and then provide transmission infrastructure and local services to their (often rural) members.
Maybe with costs for solar dropping more co-ops are looking at adding it at least where it might work to reduce peak demands.
One interesting thing I’ve learned is that the utilities will manipulate projects to earn more take. So for example they will add a decommissioning in and then get regulators to approve that and now boom utility co snuck another 1% on the take. The bonuses that the C-suite execs of a public monopoly are getting… unconscionable.
One culture thing I learned moving from an impoverished rural community to San Francisco was how little time the affluent spend on the necessities: cooking, cleaning, laundry, home improvement, shopping, etc.
Most of my free time was spent on the necessities.
Moving to SF and embracing that lifestyle (being able to afford that lifestyle...) freed me up for the pursuit of happiness.
I look at government the same way: public service should assume some of the burdens for the citizenry. utilities should be one of those things assumed by the state, paid for by taxes. The administration of which has a goal of driving down costs for customers, NOT for increasing profit
In this thread: a bunch of comments that don't understand that if you want more of something (power, food, housing, videos of cats, whatever), by far the best way to get it is to give the people providing the stuff more money.
We have "utilities on the market" now. So we get to choose between the color of logo on the invoice. Every year we can switch around new year. Then lots of marketing is going on: people going door to door as well...
For sure I now pay for all these marketing campaigns: they all offer a cheap first year. So I have to switch yearly to get a good "welcome present" (that the non-switchers are paying for me).
Privatizing a commodity-service, that utilities are (electrons/water/gas -- it's all very standardized) is the most ridiculous to me. The innovation a supplier can bring you is mostly it's marketing campaign.
What are you guys complaining about? "17.8¢ a kilowatt-hour at investor-owned utilities" ?? Here in San Francisco we're paying close to 50¢ a kilowatt-hour!!
That reminds me, my hometown, the city of Hamburg, bought back the public utilities it had privatized in the 90's, following a public referendum, in 2014.
I recall that one reason was prices for electricity and gas going up after the privatization.
I'm in Alberta, Canada where energy is (at least for now!) cheap and plentiful. I'm with a community-owned energy marketer and pay 6 cents per kwh, and just of $3 per GJ. If we paid anywhere near your rates the seperation referendum would have turned out differently!
6 cents per kwh! Can we set up some shipping back and forth for batteries, you charge them, I pay you for it and can have cheaper energy.
This is about what we pay here for delivery back to the grid, yes pay, not earn, they don't want our solar, we have too much (yes we can turn them off, and we do).
Alberta is one of the more expensive provinces for electricity, and the average is around 20 cents per kwh as of March 2026 according to federal government:
Which also has this quote: "In Alberta, where electricity is supplied through a competitive retail market, residential prices tend to be slightly higher and more variable over time compared with most other provinces."
Nobody forced Germany to shut down their nuclear plants. The US even warned them not to do it for over a decade. Obama and Merkel had a joint press conference where Merkel assured everyone that Germany had a "10 to 15-year plan". The Biden administration even sanctioned German companies building Nordstream 2 because it was a Russian geopolitical project that would be weaponized against them.
Merkel's lack of brain or personal folder in Moscow archives forced Germany.
It often hard to tell with Germans if it's their stupidity due to arrogance (they in many ways never grew out of their pre world war two self image as the most developed mentally, morally and technologically nation in whole Europe) or their corruption.
Whaaaa? When you run something with the goal of making a profit that ends up costing more than when you run it without the goal of making profit? Hows that possible?
I am also a counter example... My utilities are now half of what they were than when I lived in an area provided by a public utility.. (BPU.. looking at you)
It is naive to think that the government can just be 23% more efficient at getting you electricity. This excludes account for tax exceptions, cheaper financing or even government financing. The government is a monopoly and not allowing competitors in with legislation and using tax dollars to be more "efficient".
"Efficient"? Nobody believes that the sourcing is more efficient. It's the profit-margin which the government doesn't need which makes the difference, they can be significantly less efficient and still beat "investors" who have shareholders to pay.
I meant "Efficient" as in delivering the power for less cost. Investors don't necessarily care about a profit margin either. Space X is a trillion dollar company and has 0 profit.
Its naive to think that removing the rent-seeking middle-man class won't lead to savings. Same with private healthcare costs vs more socialized or single-payer systems.
rent seeking middleman? I would say the government has the most special privileges of the competitors in the market no?
We have the most expensive healthcare in the world and some of the worse it is a over regulated industry full of complexity and corruption. Look at industries without government involvement, the less involvement the cheaper and better things get.
healthcare, education, and child care all suck.
tvs, software, and clothes, all cheap and very good.
It turns out that privatization of public services does not yield the lowest prices for consumer as a result of market forces. Because it does not create services markets, it creates services monopolies.
That's why essential utility or otherwise operator that functions essentially for the common good / people must be in public or public-private hands with strong regulation on what is allowed and what isn't.
It does not appear to adjust for any of the things that matter. Taxes, cost of capital, generation mix, etc. I think the “insight” is impossible to call an insight with the lack of real modeling.
Some of your questions read to me more like explanatory factors than confounding variables. If cost of capital is lower for public utilities, great, that’s an argument in favor.
I actually think the most interesting factor is listed down in the “about the data” section: “ Most of the gap opened from 2020 to 2023, during the energy price spike: 25% at investor-owned utilities, 11% at public utilities and co-ops. Before and since, both rose at about the same pace.”
So, it might be basically the same story everyone complains about. When there’s a shock, companies tend to quickly hike prices higher than they need to, but after the problem is resolved they’re slow to let prices come down again, if they do at all.
And that detail casts doubt on other explanations because if they were the case we wouldn’t expect to see the divergence be largely confined to the pandemic. There was still a gap before 2020, but it looks like it had been a fairly steady ~1¢/KWh.
Additionally the regulations between the two are not the same.
For example, in my home state of Massachusetts, for-profit utilities are required participate in the state mandated home efficiency subsidy program, MassSave and add surcharges to the delivery charge, to a state-wide cost of $4.5 billion for 2025 - 2027.
Municipal utilities are exempt.
We’re at the bottom of the list on this post, because it’s looking at recent inflation, but municipal utilities cost much less in Mass. But there are many components to this difference.
That doesn't explain how Silicon valley powered, owned by the city of Santa Clara, can provide electricity at 18c/kwh while the next city over PG&E charges 48c/kwh
Has Santa Clara diversified their energy and Sunnyvale did not?
I have worked as an engineer is private and public power utilities and there is not a significant difference in how efficiently things get done. All human orgs are basically the same, when you get down to the people actually doing the work. Private utilities have all the security of a public utility so the 'profit margin' is not really an everyday focus at the worker bees level in the way that it is in actual private industry.
Having seen the sausage being made in both, I would say that private utilities are very little for the additional $$$ they extra t for shareholders. I would just as soon see all power production and transmission nationalized.
I remember when water was privatized in Brisbane, Australia - instantly noticing the jump in my bill. It's clear that privatizing infrastructure like water & electricity doesn't benefit consumers (unless they are somehow investors). I understand that Amsterdam is privatizing water as well. But what can be done about this? Is the only path as consumers is to become ruthless capitalists for our own survival? I wonder where this cycle ends?
One of the reasons I left academia: in a different context my colleagues would all know to shout "correlation not causation!", "conditioning on a collider", and "no true control group!"
But if they saw this they'd immediately like, subscribe, and share broadly with positive commentary.
Now look at how much they invested in keeping the infrastructure up to date. The ones I know about are very good at the rent seeking portion but when it comes to (preventive) maintenance and capacity planning they are terrible.
Some research suggests that clustering simply on public vs private is correlation not causation. Many public utilities in the USA are clustered around hydro electric system and dense urban system whilst private utilities pick up the more expensive to run and traditionally less well serviced markets.
Privatization of utilities was always bad idea. We had a lot of it in Poland, mostly driven by "govt owning it is communism, we want to get away from what" and it just made it near universally worse
Natural monopolies are always the first suggestions to keep public owned. And you can't have 2 water suppliers piping into your apartment from the source
You can. It is just that the costs of pipes (wires) are so high that you can't both charge a reasonable price and pay for the pipes. This is why most farms are on private wells - $10k to drill a well is cheaper over 50 years than pipes to each farm. (Many Iowa farms are on public water not a well because wells in those parts tend to not produce enough water for a house's need - and they pay a lot of money per month to pay for those pipes)
This is why we say utilities are a natural monopoly. If you have the pipes/wires in place and even a little paid off you can undercut and competitor until they are bankrupt.
Even if there is only one set of pipes under the street, the owner of those pipes is constrained from acting in a predatory way if the market is free. They are disciplined by potential competition (if prices too high or lets the water quality drop, it suddenly becomes financially viable for a competitor to dig a rival pipe, or set up localized system, or offering water trucking to your site).
Under a government-granted monopoly, that threat is legally banned (except for maybe water trucking)
Government granted monopolies are granted under oversight and regulation that would be extreme in any other scenario. Many of them don't even get to set prices. No discipline or market forces needed. The regulators just regulate predatory action.
In your example no one is going to dig a rival pipe because you can't just go around installing pipes under other people's roads and land. The permission to do that is granted to a single entity by the government, further reinforcing the natural monopoly. There is no situation where it is economically feasible to lay more pipe when you have no right to do that.
You are correct, but only at unrealistic levels of bad. A potential competitor risks that they lower the prices after the have dug in the pipes and that is enough that the competitor is bankrupt. Even if water quality is the issue, it is easier and cheaper for the incumbent to fix the issue than for you to dig in new pipes. Only in the case where the incumbent has worn out pipes that all need to be replaced at once (unlikely - pipes last a long time and we have had good success relining pipes in many cases: leaving only a minority that need expensive replacement at any one time).
Because the bad has to be unrealistically bad before someone can compete nobody sane will.
At the low end, the GAO estimates of federal spending, 3-7% is fraud, 3% is improper payments, 7-10%+ is legal but wasteful (e.g. zombie programs) - totaling 13-20%.
In the middle, DOGE (don't smite me, just citing multiple sources) estimated 30-33% was waste.
That's $200B that could've, in some parts, gone into grid investment and lower electrical costs. Instead, it's the rake for financially engineering being a middleman.
I'm confident this is solved for in the long term with more coop and muni ownership of grids, alongside rapid deployment of solar and batteries so folks can go off grid if they want, as is happening across Pakistan [1] [2]; in the interim, it's annoying though, and for those who cannot afford to be squeezed for these profits, painful.
(non profit, coop, and muni grids can go to the bond market just like an investor owned utility to borrow for grid investment capital, so this is not an excuse for investor owned utilities to exist)
> Privatization supporters seem to always use waste as a boogeyman, but never the inevitable profitmaxxing for management and shareholders
That’s because under capitalism, waste and inefficiency are touted as the ultimate evil.
Making profit is the entire purpose of the whole system, so it’s inherently good, and “the right thing”.
Especially in the US, even talking about a reduction in profit is akin to blasphemy, and quickly gets one labeled a quack.
It's unfortunate, for sure. Luckily, clean tech manufacturing and deployment will eventually outpace the ability to capture energy for returns [1] [2]. China currently has enough solar PV manufacturing capacity for double current global demand, and battery manufacturing capacity is catching up. Prices will keep coming down, and eventually everyone who wants to go off the grid and has space for batteries and solar should be able to.
Just like China is cramming down legacy auto export TAM through their EV exports (BYD has surpassed Ford in international sales as of this year, as is constrained by not having enough marine vessels to export more), solar and batteries will come for investor owned utilities as well.
It's not even that though. Looks like public utilities are only offered in areas where those utilities are cheap to provide or abundant, and private utilities fill in a gap in harder to reach areas.
The study even points this out as a foot-note but then focuses on rate of price increase versus nominal price. It should not come as a surprise that in areas where utilities are less abundant the price will increase faster than in areas where that same utility is plentiful.
That’s roughly the opposite of the development of electric utilities in the US. The IOUs owned dense urban areas and refused to electrify further out. It was only the rise of public municipal utilities that got them to go to the states, implement the regulatory compact, be granted rate of return, etc., and then they began building out more.
That is the historic situation yes. However it doesn't change how things are today. the municipal utilities that remain have lower costs because they don't have the more expensive structures.
Some of it goes to bonuses and dividends, but 23% is a really big number.
I think a big part of that number is risk, dividends are tied to risk too.
The very idea of investing is that you take risks in exchange for profits. That is, if it fails, you lose your capital, if it succeeds, you become richer. A public provider doesn't work the same way, risk is covered by taxpayer money. If it fails, taxpayers foot the bill, if it succeeds, cheaper service.
Sorry I know its sacrilege to say but i think there's some things the government should simply just own. Water, energy, roads, transit etc.etc.etc... There's no advantages to bringing in private enterprise, at best they merely act as rent seekers, and at worst they strip the infrastructure of all value without any maintenance, getting taxpayers to build it again.
It should not really be controversial. Classic liberal economics (from e.g. John Stuart Mill and on) generally acknowledges that natural monopolies exist and that it's generally beneficial for everyone if they are publicly owned.
Were you born into a world with electricity naturally occurring in sockets?..
> A natural monopoly is a monopoly in an industry in which high infrastructure costs and other barriers to entry give a market's largest supplier an overwhelming advantage over competitors. An industry is a natural monopoly if a single firm can supply the entire market at a lower long-run average cost than if multiple firms were to operate within it.
https://en.wikipedia.org/wiki/Natural_monopoly
I'm going to assume ignorance rather than snark here.
A natural monopoly is one where a product or service is:
- Widely considered fundamental to the public good (and in most cases, has very inflexible demand, meaning that people will often pay any sum to access it)
- Whose cost overheads are either fixed or grow slower than the variable costs (meaning that the investment required to scale the service not accounting for costs that scale with individual usage benefit from economies of scale)
- Easy to be gamed for profit in the hands of a profit-driven entity (either in the form of extortionate pricing directly, or cost-cutting on things like infrastructure maintenance; a good example here is how PG&E has infamously failed to maintained their power lines in California, leading to large-scale wildfires)
In the modern day, the best example of these are public utilities: water, power, road networks, public transit.
In these cases, the latter two points are used to justify public ownership, which in turn defeats the third point.
I know. The post I was answering to spoke about predatory companies that privatize the air and water of the world we were born into, or similar. Apparently it was edited to read more sober, which is good.
> Were you born into a world with electricity naturally occurring in sockets?
Massive swaths of the US required government action to get telephone and electric service. In many cities/counties, the city or county owns the power utility. In other rural/suburban situations the power utility is a non-profit cooperative that was encouraged/bootstrapped through low interest loans in the 30s and 40s. Telephone universal service was achieved because AT&T agreed to it in exchange for the government allowing it to be a (natural) monopoly
That's now what natural monopolies mean, "natural" alludes to the fact that by nature, only one company will be able to operate and maintain and other companies will be locked out due to barriers of entry or other complications. Look into it
This is what’s called “bad faith”
Natural != occurring in nature in this context
No, but I was born into a world that requires a massive amount of collaboration, specialization, and mutual respect for one another to enable our society.
This is a wonderfully uneducated response to the above point.
Go google "natural monopoly" please. No one is arguing that work is not happening to provide a service.
We're arguing that capitalism clearly fails to achieve good outcomes for optimizing the quality and cost of that service in the case of natural monopolies.
To play devils advocate, in NYC which has a massive transit network. There exists a series of private transit "companies" (sometimes just a guy with a 10 person van), that provides routes that are poorly served by the publicly run transit network. The famous Chinatown buses would be another example, that run between Chinatowns in the North East, are incredibly cheap, fast, and are profitable.
They still run on public roads.
I'm all for multiple city bus operators.
This is a great example/argument for how a competitive local ISP market can work. The city/county/state should string fiber to every single house, and then various ISPs can just plug a customer into their particular switch/OLT/splitter.
A common "monopoly" of the physical last mile served by many providers traveling over it
I agree, bring it on.
It's not really devil's advocate, it's the way Capitalism should be structured. If we had government covered health care I'd expect private markets of vanity surgery or uncovered procedures to still exist. If we had government run utilities you'd still have private installments for demanding needs, generators, off-grid construction, etc, etc.
> To play devils advocate, in NYC which has a massive transit network. There exists a series of private transit "companies" (sometimes just a guy with a 10 person van), that provides routes that are poorly served by the publicly run transit network.
Are they part of the regular fare structure?
A bus isn’t a natural monopoly. A subway system is.
Tokyo uses privately run subway/train systems and is largely considered the envy of the world with regards to transit. The united states prior to WWII mostly ran on privately run transit systems, with private companies running street car and subway lines. So it does not appear to actually be that much of a natural monopoly.
Or to better apply to the bus example: A bus isn’t a natural monopoly, a city street is.
then that's not a natural monopoly and not a good example of what is being discussed.
They said transit as a class of natural monopoly and I showed a counter example where there are private companies entering a space where the natural monopoly already exists.
No, you misunderstood the point of the poster and decided to bloviate about unrelated things.
Hello from Québec! Yes, with the right structure and guardrails in place, you definitely get better costs for citizens and businesses. Citizens can also petition the government when something needs fixing, which is better than "fuck you if you're not a shareholder".
For an example of the opposite, you can unfortunately look at the Canadian telcom oligopoly.
It's only an anathema to those who want to buy the world we were all born into and rent back the air you breath every day until you die.
There's no reason we should want this for ourselves.
> to those who want to buy the world
Oh, they don't need to buy it, they already inherited from their rich parents. The world is just a set of trading cards to them at this point.
Elon Musk's fake money could buy a new $10 million mansion every single day--every single day--for THREE CENTURIES, and he wants more!
Society is delusional. We can't even collectively agree to tax psychotic money-grubbers who cannot even enjoy the fake wealth they have their names on.
As if the interest on his money wouldn't grow faster than this :) We are stupid :)
This was the platform of Katter’s Australian Party.
Instead the Electricity Board got privatised with promises of lower prices. Electric prices tracked inflation and general cpi from when Queensland electrified until privitasation in 1997.
Since then prices have gone up about 75% beyond inflation.
I get it when there's an obvious natural monopoly, and an alternative is just infeasible to build.
I don't think it applies to electricity in many cases. If there are investors in building new electrical capacity, then it likely means that the area is underserved, and the prices are naturally higher. The government apparently did not build what the market is ready to pay a premium for.
The original Edison's electric company was private, and for-profit. It started selling electricity in 1882. I wonder how soon would a government-owned company manage instead.
Natural monopolies should always be run by the state.
I think there's some examples of a split model that work well, i.e. the grid is publicly owned but the retail functions such as metering, billing, and service connections are private and have competitive providers.
Consumer choice, or public good/public utility: Choose one.
A deregulated market should provide choice, if it provides monopoly the gov should step in either by breaking up (forcing choice) or making public (forcing good).
there is no consumer choice in a natural monopoly. that's why it's called natural monopoly.
Well, wouldn't it have to become a public good / public utility then? Isn't that what we're all talking about ITT?
I don't think that contradicts what the person you were replying to said. Specifically, they said break it up or make it public. If there is no option to break it up, then making it public is the only option.
Personally, I would like to see more competition in some of those spaces. But if the government is going to enforce any sort of competitive restrictions, it should go all the way and own it. For electricity, they could own the transmission lines and allow competitors to generate and sell electricity. The government could then charge a fixed monthly fee per connection (based on capacity, so industrial users would pay a lot more than homeowners for their connections).
My last two energy providers have been coops. In north eastern California, the coop had one feed from PG&E and the other from a company out of Reno (I forget the name). It ended up being cheaper and more stable than PG&E itself.
You really don’t get to choose where your power comes from though and pge owns the lines. Paying another org is just throwing money away.
People on this thread forget that when legislatures cut funding, governments also defer maintenance on the infrastructure; especially since you mention roads and transit: governments tend to underfund both of these. Private companies of course do the same when shareholders demand more profit. It’s the same.
The rest of your point I agree, but good maintenance is not a given regardless of private ownership or government ownership. In fact I would say this is part of being a monopoly: there are no competitors and no market forces to compete on reliability.
> good maintenance is not a given regardless of private ownership or government ownership.
Its not about maintenance, its about pure math and efficiency.
Natural monopolies have 0 advantage in terms of price discovery, therefore there are no market forces. And you get all the disadvantages of a monopoly without any of the advantages of capitalism.
Many purely capitalist countries still advocate for natural monopolies to be goverment run (Norway oil being public, Singapore owning all the land and housing, Spain having public healthcare) and all of those examples beat countries that have privately owned natural monopolies.
Cleveland has had two sets of power lines for a long time (despite FirstEnergy’s many attempts to shut down Cleveland Public Power). It’s not necessarily a natural monopoly.
Instead it one where incumbents try very hard to convince everyone it must be a monopoly.
I'd prefer them to be mostly municipal or collectively owned by multiple municipalities over making them state-owned. Obviously power generation is big enough for it to be state-owned to be a workable choice.
Power generation is easy to be competitive though.
thats the government
You are 100% correct.
There is a lot of writing and philosophy on this exact issue - state owned enterprise, partial to complete deregulation, state operated enterprises, etc.
At the end of the day it will be about tradeoffs. CA/TX and others "deregulated" electricity by splitting the public-side (transmission and distribution) as heavily regulated from the generators and consumer purchasing sides. In TX, nominally, this lowered rates, though it has been some time since I researched this space. What it also did was cause pretty bad second order effects for transmission providers since they can't exclude use of their owned networks due to the physics of grids. It also caused underinvestment in the grid, causing the major freeze-outs and near-collapse of the natural gas delivery pipelines that made the news.
There CAN be advantages to bringing in private enterprise, but, they need fairly strict oversight to not cash out/distribute the funds needed for infrastructure O&M/new build to shareholders.
Most of the best public infrastructure is state owned but privately operated, like Sweden and Singapore’s transit systems. But the ownership model is less important than other things. Japan’s world leading training infrastructure is privately owned and operated. By contrast, almost all of the United States’s terrible transit systems are publicly owned and operated. Water is a public utility and almost all the United States and the water systems are in terrible disrepair.
The problem with public ownership is that it drives price is too low because it allows people to vote on prices. Your average age 60+ voter doesn’t care if lowering the water bill now means that the system will be in bad repair 30 or 50 years from now.
At the end of the day, there is no magic policy bullet to fix problems with the people. Public infrastructure in the US sucks whether it’s publicly owned or privately owned. But I bet if the Japanese trains were publicly owned instead of privately owned, they would still be pretty good.
My state deregulated natural gas which meant that despite the city owning the delivery and turning on and off the gas each for profit company had to have their own HQ, marketing budget, customer service, sales team, and C-suite.
The fixed service fee cost $40/month which was more than the natural gas consumed every month but Jan/Feb. They also make cancelling difficult, I was put on hold for 40 minutes without an music so I didn't know if I had been disconnected or was just on hold.
Electric is run by one company and their service fee is $15/mo. Their customer service is also much better.
Alberta's electricity system is Canada's example of this. "de-regulation" meant the separation of generation, distribution and retail. Decades after this was supposed to lower the price of electricity, it's done the opposite. Big corporations are now guaranteed a profit at each layer of the system. There is no competition, because why would they compete if they're guaranteed a profit?
So the result is Albertans pay more than most other Canadians for electricity. Even if the actual rate is low (which it isn't), the cost of electricity is usually only 10% of my bill. The rest is "transmission" "distribution" etc. It's insanely expensive compared to next door in British Columbia.
Wait, they privatized transmission as well?
Electric production and transmission is interesting from an economic perspective, as the physical infrastructure is almost as perfect an example as it's possible to make for something which should be governmental (or under its direct control). You just can't get working competition there. While the power itself is the perfect example of the opposite, where the market should (according to theory at least) be perfect.
> While the power itself is the perfect example of the opposite, where the market should (according to theory at least) be perfect.
Markets don’t seem to want to solve for outlier situations like extreme weather events or significant hardware malfunctions. Basically I’m talking about what happened in Texas. When it’s a safety issue, it can be hard to align incentives to make planning for outliers worthwhile to market actors.
It’s more than that - it’s that if price is your only signal, it’s always going to be cheaper as a producer to ignore long-term sustainability, which means the companies which do so will “outcompete” the companies which plan for the future, leaving you with a market full of companies utterly incapable of handling an adverse event when it comes around. It’s not just greed, it’s a fundamental problem with how the market compresses signals about companies and products.
Transmission is privately owned and operated but publicly controlled. Like other natural monopolies, the regulator tells the operator what to provide and how much they get paid for it.
The main reasons for this arrangement are political -- debt stays off the government's balance sheet, and labour disputes aren't "the government's fault".
There's no reason for not separating generation, distribution, and retail.
Those are completely different activities, with completely different competency requirements, economical and political characteristics.
Also, bundling them is an anti-competitive measure. What is important for generation in particular, that is a competitive market where you can have private companies.
That works in theory. In practice each company has their own overhead which increases their service fees.
They regulated nat gas in my state and the service fee is more than the gas consumed.
Hydro One in Ontario is infinitely worse and was a government spearheaded privatization effort. "Sorry, not sorry" from kathleen wynne still echoing in the ears...
Ontario privatized Hydro as well
Utilities should at minimum not have a profit motive involved, but the fact that we've been so happy to deliver vast profits to shareholders instead of proofing our grid has been a real tragedy.
Is there any way out of this "shareholder value" hell? The moment a company goes public they're legally required to make stupid, short-term decisions that are worse for everyone, even the shareholders? (unless those shareholders know _when_ to sell their shares)
> The moment a company goes public they're legally required to make stupid, short-term decisions that are worse for everyone
Nope there's no legal requirement. Management is happy for you to believe there is because they get paid in stock.
The only legal requirement is to make decisions that are in the shareholders' interests, rather than the management's. That means short-term-bad, long-term-good decisions are actually strongly encouraged.
I think what it really means is that the public interest means nothing and companies will profit by any means necessary.
The fact that companies are organized the way they are today is not some fact of natural law. There are legal structures of ownership that have been put in place by real people, which means there are the means to completely change those ownership structures.
Allowing outside shareholders in combination with private ownership is going to result in the kinds of short term thinking that lead to the "exits" and other profit-maximizing behaviors.
One "way out" is to make laws that give good public incentives / allow people to easily incorporate as organizations where the employees are the sole owners of the entity (co-op).
There needs to be regulation that discourages the behavior. Some ideas that have been floated include expanding corporate responsibility to include the workers and customers, loosening corporate responsibility laws so that companies don't have strong obligation to its shareholders, ending quarterly earning reports, reviving the ban on stock buybacks, etc.
No, because shareholders are the owners of the company. The legal requirement is more a fail safe than a mandate, because obviously the company wants to act in the best interest of the company. Without the legal mandate these companies would still almost universally act the same.
There are laws that a plumber can't come into your home and smash up your pipes. That law however is not the thing that prevents the plumber from doing that, the plumber naturally works in your common interest. It's the exact same with companies, shareholders elect a board who hires specialists to run the company. Notice the shareholders are at the top.
> The moment a company goes public they're legally required to make stupid, short-term decisions that are worse for everyone
FWIW this is a myth.
Short term thinking is because of incentives. Executives are given options so they want to juice the stock price while they are CEO.
Maybe it's overstated? It cannot possibly be a myth.
No. Public companies are absolutely allowed to engage in long term strategies like "don't burn the future and reputation of the brand to temporarily juice near-term profit". The reason they don't is because the people making the decisions don't care about the future of the brand and do care about near-term profit.
https://law.justia.com/cases/delaware/supreme-court/1990/571...
> Second, absent a limited set of circumstances as defined under Revlon, a board of directors, while always required to act in an informed manner, is not under any per se duty to maximize shareholder value in the short term, even in the context of a takeover.
It’s absolutely untrue. It’s why companies are legally allowed to burn money on questionable investments or donate to political candidates if their Boards are fine with it.
An adjacent commenter explained further: https://news.ycombinator.com/item?id=50209678
"Shareholder value" is just another way of saying return on capital. Do you want to reduce return on capital? (the answer could be yes or no, just advancing the discussion)
Or do you want to redistribute the ownership of capital?
You're missing the last bit - shareholder value is return on capital for shareholders
The interests of the shareholders diverge quite strongly from the interests of electrical utility customers. It is generally a parasitic relationship where they consume resources that could have been spent improving utility service for the customers, either directly via dividends or indirectly by avaricious behavior on the part of the company in pursuit of their stock price.
> The interests of the shareholders diverge quite strongly from the interests of electrical utility customers.
Unless the customers are the shareholders, as in a co-op. The article's data seems to show that co-ops provide the cheapest electricity, which makes sense because the owners are the same people as the users, so the incentives are aligned.
this is the key. Of course, investor-owned utilities will try to charge as much as they can to maximize return on capital. The major question is "do we want to maximize return on capital in our utilities?". I would argue the answer is no since providing utilities is a public good and facilitates all other activities in the society, and forms natural monopolies.
>Or do you want to redistribute the ownership of capital?
I think that's unfair. Do you disagree that companies who go public become myopic and attempt to extract more value until they've hollowed themselves out?
I would argue the effect is more pronounced in non-public companies that have private investors. Private equity especially does this, but VC backed startups also display extreme return on capital seeking behavior (albeit through growth rather than hollowing)
So the problem is mostly just outside meddling?
Disrupt natural monopolies. Have government provide a common good.
https://en.wikipedia.org/wiki/Long-Term_Stock_Exchange perhaps
> Is there any way out of this "shareholder value" hell? The moment a company goes public they're legally required to make stupid, short-term decisions that are worse for everyone, even the shareholders?
Shareholder value (primacy) is one interpretation on the purpose of companies (and a relatively recent one):
* https://en.wikipedia.org/wiki/Friedman_doctrine
There are others:
* “Profits are to business as breathing is to life. Breathing is essential to life, but is not the purpose for living. Similarly, profits are essential for the existence of the corporation, but they are not the reason for its existence.” ― Charles A. O'Reilly, Lead and Disrupt: How to Solve the Innovator's Dilemma, https://en.wikipedia.org/wiki/Charles_A._O%27Reilly_III
* “On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy...your main constituencies are your employees, your customers and your products.”[72] — https://en.wikipedia.org/wiki/Jack_Welch#Politics
If you back to the mid-1900s US:
> In 1949 General Foods’ president Clarence Francis told Congress that he had a “three-way responsibility to the American consumer, to our associates in this business, and to the 68,000 [stockholders in General Foods]. We . . . would serve (the company’s) interests badly by shifting the fruits of the enterprise too heavily toward any one of those groups.” Two years later, the president of Standard Oil of New Jersey claimed that managers needed “to conduct the affairs of the enterprise in such a way as to maintain an equitable and working balance among the claims of the various directly interested groups—stockholders, employees, customers, and the public at large.” So widespread were such views that, in 1959, one writer in the Harvard Business Review complained that it was no longer “fashionable for the corporation to take gleeful pride in making money.” Instead, he complained, it was typical “for the corporation to show that it is a great innovator; more specifically, a great public benefactor; and, very particularly, that it exists ‘to serve the public’.”
* https://law.temple.edu/10q/purpose-corporation-brief-history...
Or further:
> American corporate law has long drawn a bright line between for-profit and non-profit corporations. In recent years, hybrid or social enterprises have increasingly put this bright-line distinction to the test. This Article asks what we can learn about the purpose of the American business corporation by examining its history and development in the United States in its formative period from roughly 1780-1860. This brief history of corporate purpose suggests that the duty to maximize profits in the for-profit corporation is a relatively recent development. Historically, the American business corporation grew out of an earlier form of corporation that was neither for-profit nor nonprofit in today’s parlance but rather, served a multitude of municipal, religious, charitable, educational, and eventually business purposes in early nineteenth-century New England. The purposes of early American business corporations—rather than maximization of profit to private shareholders— were often overtly public, involving development of local transportation, finance, and other much-needed economic infrastructure. With the rise of factory-based manufacturing, railroads, and other capital-intensive industries in the middle decades of the nineteenth century and the advent of general incorporation statutes, the purpose of the American business corporation shifted fundamentally from public to private. By 1860, the stage was set for the modern firm.
* https://repository.law.umich.edu/mbelr/vol9/iss1/2/
The idea that it is some kind of 'legal requirement' is also a myth:
* https://scholarship.law.cornell.edu/facpub/771/
This behavior may have started with Dodge v. Ford.
tl;dr Ford wanted to invest profits back into Ford company and Dodge forced them in court to pay dividends instead.
https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co.
> Michigan Supreme Court held that Henry Ford had to operate the Ford Motor Company in the interests of its shareholders, rather than for the benefit of his employees or customers.
That quoted sentence does not accurately summarize the ruling; see §Significance in the article.
For a fuller treatment see:
* https://scholarship.law.cornell.edu/facpub/771/
> The moment a company goes public they're legally required to make stupid, short-term decisions that are worse for everyone, even the shareholders
The problem is a lot of companies functionally behave that way but there actually isn’t a mandate resembling anything like this, though it’s repeated so often I’m not surprised a lot of people it’s the case. Fiduciary duty doesn’t translate to “rip up and sell everything that isn’t nailed down, burn all your goodwill, and squeeze the shit out of everyone so you can extract every red cent as fast as humanly possible.” You are allowed to plan for the long-term. We just don’t and we create all sorts of incentives (bonus structures for instance) to chase short-term gains.
The investors aren’t going to rise up in all their fury and haul off a CEO to be guillotined because he invested in a project that spans more than a quarter. But unfortunately, plenty of businesses love operating as if that’s the case, because it gives an excuse to make quick dirty money. So they hide behind this erroneous perception of what constitutes “fiduciary duty.“ In the US’s particular form of capitalism it makes a lot of sense, even if it’s terrible for us as a whole.
Lately I’ve been starting to wonder if the world has changed in a way where long term planning doesn’t work anymore. If information and the reaction to it propagates so quickly that the world changes faster than your plans can adapt.
A long term plan for a company is _at least_ a decade. If your plan ended today, it started in 2016 so it has had to survive COVID, inflationary periods, several trade wars, the rise of AI and now the side effects of the war in Iran.
If your long term plan has to adapt to those in real time, is it even a long term plan? Or is it really a series of long term plans cut so short they became short term plans? I can see companies adapting to just drop the long term premise entirely.
Well, partly companies behave that way out of anticipatory obedience: if they were to really focus on the long term at the detriment of short-term profits, you'd bet that at least some (maybe influential) shareholders would protest. And partly of course the CEO's compensation depends on the shareholders being happy, not on the long-term viability of the company, so there's that...
Are there many examples of true private ownership? The power utility in my area is investor owned but publicly regulated. They cannot raise rates without approval from a public commission, and I assume are limited in other decisions as well.
If you can share the tickers of these "vast profits to shareholders" utilities, I'd be delighted.
As far as I can tell utility companies are pretty bad at "vast profits to shareholders".
Utilities have made $200B+ in profit since 2021, new report says - https://www.utilitydive.com/news/utilities-have-made-200b-in... - March 17th, 2026
Paying for Their Profits: How Ratepayers Foot the Bill for Soaring Utility Profits - https://energyandpolicy.org/utility-profit-report/ - March 12th, 2026
- Some utilities consistently operate at significantly higher margins than the average. The top 10 utilities by average margin over 2021–2024 include MidAmerican Energy (27.22%), Florida Power & Light (23.51%), Nantucket Electric (23.24%), Empire District Electric (22.45%), Florida Public Utilities (20.35%), CalPeco (20.28%), Public Service Electric & Gas (19.44%), Duke Energy Carolinas (19.07%), Alabama Power (18.71%), and AEP Texas (18.63%).
Tickers please. I can make any flashy story about any industry if I hide a holistic picture of their finances.
Here you go: XEL, AEP, SO, EIX, CPK, AQN, NGG, NEE
Thanks
These are their five year stock gains, with the general market for reference.
Market (SP500): 68%
Market(tech): 89%
XEL: +20%
AEP: +51%
SO: +47%
EIX: -5%
CPK: +2.5%
AQN: -64%
NGG: +30%
NEE: -3.5%
Looks like a pretty bad industry for profits, even stacking the dividend on AEP, it still comes up short of SP500.
Your goal post for acceptable profit taking for utilities is… the S&P 500?
That makes very little sense.
Also a reminder that stock price is not a measure of profit.
Everything comes up short of the S&P 500.
Utility companies get local monopolies and in exchange their prices are regulated. Consequently they have moderate but stable, essentially guaranteed, returns.
I have literally provided you reports and company names. If you don't like the data, or don't believe the data, reconcile internally. UtilityDive is an industry publication, the financials are public.
I can't address these because most are part of larger orgs, so I am not sure where they are getting their numbers from or how they are constructed. But someone else replied with tickers (including parent companies of the ones you named) and I addressed those.
You haven’t provided the relevant metrics to address their WarmWash’s claim. If the utilities are earning outsized profits, then their shareholders would be earning outsized returns.
Comparing long term returns using a website like this would help figure out if the businesses are over performing.
https://dqydj.com/stock-return-calculator/
Outsized profits does not necessarily mean it flows through to shareholders. That's a management choice. You can be very profitable and not buy back stock or issue dividends.
If you are insinuating corruption, then no discussion can be had since no numbers can be trusted. If there is no (or sufficiently little) corruption, then shareholder returns would be a reflection of the business’s profitability.
Call it what you want, these are unnecessary margins that should be crammed down. Regulation, nationalization, I am not picky how. Whether shareholders are seeing outsized returns from the regulatory capture, also not too concerned about.
I am fairly confident the cohort of those who support investor owned utilities are a vocal minority.
For all the non taxpayer owner utilities I am aware of, the margins and utility prices are completely controlled by government employees. Government employees that are hired by leaders that voters vote for.
Note that there exists the same incentives for publicly owned and investor owned utilities of voters today wanting lower utility prices at the expense of future utility customers by keeping capital expenses down today.
>I am fairly confident the cohort of those who support investor owned utilities are a vocal minority.
I will be the first to support only publicly owned utilities. But that has nothing to do with using bad logic and numbers to determine outsized margins.
Not only do they have a profit motive, they have a 'Guaranteed Rate of Return'; All this at the citizen's expense.
Rate of return issue, and how the current bond market activity and yield curve plays into this, is covered in https://www.thebignewsletter.com/p/how-the-federal-reserve-s...
As interest rates go up, investor owned utilities increase their rate of return on equity ask, pushing up consumer electricity prices. A baseline of consumer electric demand is inelastic, and required for life.
It's hard to find any sector not impacted deeply by the price of money (US10Y).
But yeah, natural monopolies with inelastic demand (power, water, healthcare, shared infrastructure) should be publicly owned, imo.
I find it a somewhat humorous issue because most of the US landmass is covered by publicly owned electric utilities already. Investor owned utilities cover more people (Arizona, California, New York, Florida, Maine, Northern Illinois up through Wisconsin to the Michigan UP, primarily), but in smaller (relative) geographic areas.
https://images.jifo.co/71923989_1696512865925.jpg
https://www.electric.coop/electric-cooperative-fact-sheet
The only real proofing of the grid is distributed generation and neighborhood microgrids. Centralized generation with distant distribution is subject to single point failure with widespread impact.
Yeah, they should be like those nonprofit hospitals.....
Which is to say if the solution was that simple and the fruit that low hanging it'd be done already.
At the end of the day whether profit or not the problem is that there's no consequences for sucking and no reward for not sucking. Government agencies tend toward fiefdom expansion, amassing power and graft. For profit entities tend to try and create situations where they can extract rents on the flimsiest of pretexts. They both seem to suck for energy though perhaps government sucks a tiny bit less. Neither "solves" the problem because neither seems inclined to steadily march toward cheaper/better/faster/whatever-er energy. They both seem to try and increase the suck if left to their own devices.
I guess it depends how you fund the system then. If there are not 'profits', how would additional infrastructure and upkeep be done, without just raising rates higher to pay for it? And who would loan them the money? The government? Oh, so back to taxpayers.
How are roads maintained and upgraded?
"Taxpayers" are the public.
The infrastructure is for the public.
Why shouldn't the public get to pay for its own infrastructure without a middleman trying to make a buck?
Some use a lot more electricity than others (think companies and industries)
Public utilities receive unfair advantages like preferential financing, tax exemptions, and government infrastructure grants in your definition of subsidies, public utilities frequently receive some form of government support. (unfair as in not apples to apples comparison)
> Some use a lot more electricity than others (think companies and industries)
Okay sure, and if the utility is public, the public should get to set policies accordingly.
> Public utilities receive unfair advantages like preferential financing, tax exemptions, and government infrastructure grants in your definition of subsidies, public utilities frequently receive some form of government support
Unfair to who? Somebody who wanted to profit off the public? As a member of said public, excuse me for not being the most empathic towards people trying to make a buck off me.
A middle man that can bail out of consequences for free, while the public can never bail out of obligations and needs. There was something in game theory about such sequential games where one side can only loose if it plays.
Huh? Profits are outside capital improvements. That is the nature of profits. There are arguments for private utilities but this one makes no sense.
This whole "but government is inefficient" argument has never convinced me. Our local electric provider has as bad or worse bureaucracy and ever-increasing rates. Bureaucracy is just a symptom of aging human systems, and it can be fixed. Monopolies that serve the public good should never been profit driven, full stop.
One of the great acts of human creativity has been to convince the masses that if you install a bunch of middlemen who are looking to profit, goods and services will be cheaper and better.
I think part of the success of this message is that it’s so obviously silly that people feel silly questioning it.
It might come from other factors than aging. The incentives are different and the way the structure evolve too. In public institutions, political tempo affects operations.. every new head of minister will reorganize things for a short while and then issues start showing up, until the next election. It makes people unable to care for efficiency after a while because they know how often friction will grow again.
Maybe small difference in finances too, very often public sector struggles with basic tools. I "feel" that private sector is a little more prone to renew that part (to satisfy the efficiency gods). That said it often backfires because they will also replace perfectly good tools or software to get the latest shiny.
Then there's mass.. but large private corps will have the same issues.
Its any job where you feel you have the customer by the balls, held hostage, that thus disolves into a one sided free for all.
The government is a monopoly...
And as unconvincing as "government is inefficient" in this case
Yes but the governments sole purpose isn’t to return infinite profits to shareholders………….
So what is the government's sole purpose?
Also this is not the sole purpose of companies.. SpaceX is a trillion dollar company with 0 profit.
The free market has created everything you use the more we turn the keys over to government's the worse things get.
Companies can't get infinite profits because they will be undercut by other companies COMPETING. The government can get infinite power and control though.. they have no competition.
> SpaceX is a trillion dollar company with 0 profit.
And it got there in part through the evisceration of NASA.
> The free market has created everything you use the more we turn the keys over to government's the worse things get.
Government funds research that has brought us such advances as moon landings, computers, and the internet. What an odd example you chose in SpaceX
Why are you pretending that utilities exist in a "free market" in any way?
> The free market has created everything you use the more we turn the keys over to government's the worse things get.
This might be your personal ideological creed, but it is not a self-evident axiom you can just assert with zero backing.
> Companies can't get infinite profits because they will be undercut by other companies COMPETING
Then why haven't they?
> The government can get infinite power and control though.. they have no competition.
Are you aware other countries with their own governments exist?
> So what is the government's sole purpose?
To establish justice, ensure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty.
> Also this is not the sole purpose of companies.
Friedman disagrees.
> The free market has created everything you use the more we turn the keys over to government's the worse things get.
Which is why we have never needed government regulation of things like food, air, water, shelter, work safety, accessibility, or anything else. The free market provides.
> The government can get infinite power and control though
Which is why in a free society the government is answerable to the people.
Yes. Instead they return infinite power to elites and politicians.
Your argument still applies to capitalists except we don't even get the fig leaf of a vote, so what's your point?
You get to vote with your dollars and choose other options.
You can vote for other politicians too.
With the obliteration of small business you can choose to buy from the oligarchs or go make it yourself.
"government is inefficient" is a canard spit out by captalists as part of their propaganda program. Same with "you're better off without a union."
Profit going to capitalist owners who don't do any work is an inefficient allocation, IMO, more than an "inefficient" government.
Capitalist using money to buy capital and then sell services, brilliant.
Government using money to buy capital and then provide services, deadly socialism.
It's always just been about capitalists wanting less competition. That's why they don't want the market to decide and fight for laws to literally outlaw stuff like municipal broadband. If they are so much more efficient, they should be able to offer an equal or better service for the same or better price.
Government using people's taxes to waste money with 0 accountability
They have so much accountability. Everything is in public for inspection, they're subject to elections happening whether they like it or not, they have to follow strict laws and can be sued or even imprisoned, there's oversights and review boards. Depending on the position there's even television cameras broadcasting their work live. You can just walk in and sit down on them. There's far far more accountability...
In practice what the "small government" ideology actually does is get rid of these accountability mechanisms and put scammers and corrupt people in charge instead.
In many places I can see every single government employee's salary, down to the janitor. Which public company has the same level of transparency?
Yes, a government has never wasted tax money by giving a contract to a private company before.
Those companies that win big pork filled contracts would never have any incentive to get the company to waste tax dollars.
Adding the profit motive in here definitely helps prevent waste
It's a lot easier for me to vote for someone with better policies than it is for me to get the CEO of a utility company fired.
What are you talking about? I can vote out my government leaders in a democracy. I can't vote out Mark Zuckerberg or Elon Musk that run their organizations autocratically.
This feels like kinda of a useless comparison if we don't know about the tax rates they pay, cost of capital, adjusting for geographic location and local regulations etc. I.e. the largest increase was seen in NY where it is really expensive to do anything and high taxes.
Not to mention quality of service. Sure, electricity is electricity. Water is water.
But outages, outage response times, infrastructure, investments, etc. are the other side if the equation.
I have no idea. Maybe investor-owned utilities also provide worse service. However, without accounting for that, the article's claims don't mean much.
> electricity is electricity. Water is water.
except its completely not:
electricity has stability, availability during peak loads, robustness under inclement weather etc.
Water has purity, safety, and flavor. (Austin water in the fall tastes like leaves :gross:)
Yup, tax exceptions, cheaper financing or even government financing. It's like letting the referees play the game and then pointing out that they make more free throws.
Removing the rent-seeking middle-man class generally brings in savings. Same with healthcare.
Also the "refs" should be in charge. That is to say the working class are the refs and they should be able to build infrastructure without the capital owning class inserting itself as a rent-seeker between them and these services.
Your free to go start a worker owned company and compete in the market, good luck.
Based on the chart it seems than Maine was by far the highest.
I live in a counter-example. The only water and electric utility available is city-owned and I pay triple the amount of my sister and her family that lives in another city yet has 4+ private utility companies all competing with each other. And she has a house more than twice the size of mine!
Bring on the competition!
How does this system of private competing water companies actually work? Do they each have their own exclusive reservoirs and mains transmission system and water pipes right to their customer's houses/premises? And their own exclusive sewerage systems and treatment plants?
Or are they just reselling access to some ahared legacy infrastructure? In which case any "competition" is very likely an illusion.
The way I understand it in my country is this:
There is only one public water system, every house connects to it. The state tasks specific companies with its maintenance (these are often not utility providers themselves, just construction/maintenance companies).
Consumers attached to that system have a metered connection, but water just flows as long as there's enough overall. Your utilities company doesn't have to move any physical water at all. They just have to eventually "settle" the amount of water that they sold to their customers. They do so by buying and then forwarding options contracts. The electricity and gas companies are the same. They compete on
- trading (who knows best when to buy how much?) and
- consumer-facing marketing
This is how a lot of the modern economy works. Through the power of abstraction, you can run an online store without producing or shipping any items yourself and a delivery restaurant without cooking any meals.
>4+ private utility companies all competing with each other.
does every house have 4+ water lines, gas lines, etc. running to it?
if not, i'm not sure what you mean.
I imagine this works just like with electricity. You have generation capacity, with commercial entities buying or owning generation capacity and selling the resource to consumers through community owned last mile infrastructure. The sellers need to tally up and reconcile/settle their generated capacity at some frequency (not sure if daily, monthly, yearly).
utilities don't generally "compete" with each other like how most business do - becauase that would mean they own redundant infrastructure. They are more like localized monopolies, because there is usually only 1 that operates for each given address.
What are the two cities? You'd need to control for a lot of factors to figure out if the competition is the reason or the local market rate is just lower.
And then an icestorm happens and her bill is $2000?
How do you have multiple Water companies compete?
Name the city because this makes no sense. You claim private utility companies are actually installing infrastructure? Or are they just resellers that provide nothing?
The only reason cities are having issues with water and electricity is because we cut taxes on the rich. Wages went down and service quality got cut to make the CEOs richer. The US has been coasting on all the infrastructure built in the 50-60s when we had a 90% federal income tax rate and CEOs were capped at making the 2026 equivalent of 5 mil a year. Tax dodging was stopped, everything was funded and life was affordable.
If you say the names of the two cities people can intelligently talk about why this is but it's almost certainly not because it's municipally owned.
Gainesville?
Generally that's not true. Its weird people feel like they must mention any exception. Its the same as "I know someone who lived to their 90s and smoked everyday, so what's wrong with smoking?" People are aware exceptions exist and it doesn't really add anything to conversation to keep bringing them up.
Does your sister live in another state?
Utilities are one of the cases where market dynamics break down. It's very obvious why, when you realize how difficult it is build even a relatively simple electrical transmission system, or a power plant. The barriers to entry are extremely high.
Furthermore, switching from one provider to another is inherently difficult. There is only one set of pipes leading to your house, how you going to switch to an alternative? Who is going to build the line for the 1 new customer?
And finally, splitting the business across the vertical doesn't work either. Generation of power is tied to grid management, this is tied to transmission maintenance and expansion.
All things considered. Monopoly emerges naturally and rent seeking is pretty much given. There are only two options left. Either the utility is operated by government for common good, or it the monopolist is so heavily regulated and controlled by the government, that it is, in effect, its extension.
That's why most power utilities in the US are considered regulated monopolies. They are owned by shareholders but any changes must be approved by their public utilities commission first.
My electricity is produced by a cooperative. The coop has some 60k participants. And over the year it's managed to build and operate a respectable amount of wind turbines and solar installations, and it's now expanding into district heating and battery storage.
They're producing some 100GWh/year. Which is not half bad, considering they're typically at or below market price and often pay a ~6% dividend.
I think your case is unusual? Co-ops I am familiar with usually don't own generation, they buy power from a regional generator and then provide transmission infrastructure and local services to their (often rural) members.
Maybe with costs for solar dropping more co-ops are looking at adding it at least where it might work to reduce peak demands.
One interesting thing I’ve learned is that the utilities will manipulate projects to earn more take. So for example they will add a decommissioning in and then get regulators to approve that and now boom utility co snuck another 1% on the take. The bonuses that the C-suite execs of a public monopoly are getting… unconscionable.
One culture thing I learned moving from an impoverished rural community to San Francisco was how little time the affluent spend on the necessities: cooking, cleaning, laundry, home improvement, shopping, etc.
Most of my free time was spent on the necessities.
Moving to SF and embracing that lifestyle (being able to afford that lifestyle...) freed me up for the pursuit of happiness.
I look at government the same way: public service should assume some of the burdens for the citizenry. utilities should be one of those things assumed by the state, paid for by taxes. The administration of which has a goal of driving down costs for customers, NOT for increasing profit
In this thread: a bunch of comments that don't understand that if you want more of something (power, food, housing, videos of cats, whatever), by far the best way to get it is to give the people providing the stuff more money.
Hacker News has slowly taken the road to reddit style communism.
Thank you! Holy shit. It is very disheartening hearing from what I see as a intelligent community speaking with such ignorance and naivety.
We have "utilities on the market" now. So we get to choose between the color of logo on the invoice. Every year we can switch around new year. Then lots of marketing is going on: people going door to door as well...
For sure I now pay for all these marketing campaigns: they all offer a cheap first year. So I have to switch yearly to get a good "welcome present" (that the non-switchers are paying for me).
Privatizing a commodity-service, that utilities are (electrons/water/gas -- it's all very standardized) is the most ridiculous to me. The innovation a supplier can bring you is mostly it's marketing campaign.
What are you guys complaining about? "17.8¢ a kilowatt-hour at investor-owned utilities" ?? Here in San Francisco we're paying close to 50¢ a kilowatt-hour!!
Surprise!!!
That reminds me, my hometown, the city of Hamburg, bought back the public utilities it had privatized in the 90's, following a public referendum, in 2014.
I recall that one reason was prices for electricity and gas going up after the privatization.
Go figure.
Crazy how cheap the electricity is across the board.
EU average is almost double, 40 cents per kwh
I'm in Alberta, Canada where energy is (at least for now!) cheap and plentiful. I'm with a community-owned energy marketer and pay 6 cents per kwh, and just of $3 per GJ. If we paid anywhere near your rates the seperation referendum would have turned out differently!
6 cents per kwh! Can we set up some shipping back and forth for batteries, you charge them, I pay you for it and can have cheaper energy.
This is about what we pay here for delivery back to the grid, yes pay, not earn, they don't want our solar, we have too much (yes we can turn them off, and we do).
Alberta is one of the more expensive provinces for electricity, and the average is around 20 cents per kwh as of March 2026 according to federal government:
https://www.cer-rec.gc.ca/en/data-analysis/energy-markets/ma...
Which also has this quote: "In Alberta, where electricity is supplied through a competitive retail market, residential prices tend to be slightly higher and more variable over time compared with most other provinces."
Isn't power production and rates a provincial concern?
Why in the world would the cost of electricity be a factor in wanting to separate federally by anyone with the slightest amount of brain tissue?
Thanks natural gas and fracking
I wonder how much higher electricity costs would be without natural gas, fracking and nuclear.
Nobody forced Germany to shut down their nuclear plants. The US even warned them not to do it for over a decade. Obama and Merkel had a joint press conference where Merkel assured everyone that Germany had a "10 to 15-year plan". The Biden administration even sanctioned German companies building Nordstream 2 because it was a Russian geopolitical project that would be weaponized against them.
Well we see how that turned out.
Merkel's lack of brain or personal folder in Moscow archives forced Germany. It often hard to tell with Germans if it's their stupidity due to arrogance (they in many ways never grew out of their pre world war two self image as the most developed mentally, morally and technologically nation in whole Europe) or their corruption.
Whaaaa? When you run something with the goal of making a profit that ends up costing more than when you run it without the goal of making profit? Hows that possible?
There are definitely price downsides to having to pay corporation tax.
Salaries across the board are also a non-insignificant factor. Not just CEO but for brevity,
Seattle City Light CEO $340k 8% bonus
Bonneville Power Administration CEO $245k
Avista Energy CEO $4.77 Million
Puget Sound Energy CEO $1.7 Million up to 9 Million (includes bonus ramp targets)
Now let’s play a game of which are public and which are private.
I am also a counter example... My utilities are now half of what they were than when I lived in an area provided by a public utility.. (BPU.. looking at you)
There's a selection bias in the data. Investors chase the highest profit markets.
Public owned ones by definition are allowed to run in a deficit and have alternate source of "charges" in government subsidies.
It is naive to think that the government can just be 23% more efficient at getting you electricity. This excludes account for tax exceptions, cheaper financing or even government financing. The government is a monopoly and not allowing competitors in with legislation and using tax dollars to be more "efficient".
The referee should not be able to play the game.
"Efficient"? Nobody believes that the sourcing is more efficient. It's the profit-margin which the government doesn't need which makes the difference, they can be significantly less efficient and still beat "investors" who have shareholders to pay.
I meant "Efficient" as in delivering the power for less cost. Investors don't necessarily care about a profit margin either. Space X is a trillion dollar company and has 0 profit.
Its naive to think that removing the rent-seeking middle-man class won't lead to savings. Same with private healthcare costs vs more socialized or single-payer systems.
rent seeking middleman? I would say the government has the most special privileges of the competitors in the market no?
We have the most expensive healthcare in the world and some of the worse it is a over regulated industry full of complexity and corruption. Look at industries without government involvement, the less involvement the cheaper and better things get.
healthcare, education, and child care all suck.
tvs, software, and clothes, all cheap and very good.
I love this chart: https://external-content.duckduckgo.com/iu/?u=https%3A%2F%2F...
It turns out that privatization of public services does not yield the lowest prices for consumer as a result of market forces. Because it does not create services markets, it creates services monopolies.
A good lunch time (33 mins) watch on how private utilities set their prices and make money + the history of private utilities.
https://youtu.be/3fDGcZ8qpPM
Should it be investors owned monopoly have higher charges for electricity?
Thanks Capt. Obvious
I always like to point out that Nebraska is the only state in the US that has 100% public electricity.
That's why essential utility or otherwise operator that functions essentially for the common good / people must be in public or public-private hands with strong regulation on what is allowed and what isn't.
You voted for this.
Yes, utility privatisation in the UK has been terrible for the consumer (and environment) too.
[delayed]
This is a slop website selling a product.
It does not appear to adjust for any of the things that matter. Taxes, cost of capital, generation mix, etc. I think the “insight” is impossible to call an insight with the lack of real modeling.
that means "23%" profit for the people who dropped capital for potential returns.
https://www.stepchange.show/grid Good pod on utilities.
What was the hypothesis here, did we think they would be charging less?
I find that every single time these arguments are flawed, and don't account for a whole host of things.
What's the cost of capital on public providers? And on private providers?
What's the energy mix for each of them?
Are both providers profitable? How profitable are each of them?
Are there subsidies involved? Either directly or indirectly via lower than required fee increases due to political pressure.
Frankly it's tiring to always see the same flawed arguments here.
Some of your questions read to me more like explanatory factors than confounding variables. If cost of capital is lower for public utilities, great, that’s an argument in favor.
I actually think the most interesting factor is listed down in the “about the data” section: “ Most of the gap opened from 2020 to 2023, during the energy price spike: 25% at investor-owned utilities, 11% at public utilities and co-ops. Before and since, both rose at about the same pace.”
So, it might be basically the same story everyone complains about. When there’s a shock, companies tend to quickly hike prices higher than they need to, but after the problem is resolved they’re slow to let prices come down again, if they do at all.
And that detail casts doubt on other explanations because if they were the case we wouldn’t expect to see the divergence be largely confined to the pandemic. There was still a gap before 2020, but it looks like it had been a fairly steady ~1¢/KWh.
Additionally the regulations between the two are not the same.
For example, in my home state of Massachusetts, for-profit utilities are required participate in the state mandated home efficiency subsidy program, MassSave and add surcharges to the delivery charge, to a state-wide cost of $4.5 billion for 2025 - 2027.
Municipal utilities are exempt.
We’re at the bottom of the list on this post, because it’s looking at recent inflation, but municipal utilities cost much less in Mass. But there are many components to this difference.
Ok so show us a non-flawed argument because from where I sit I’m getting raked on utilities by a private corp.
Turns out energy is getting more expensive, especially when places like the US aren't diversifying their energy and are relying on dead dino juice.
That's generation
How do you explain increases in the cost of distribution?
Where’s that guy who always posts about all the solar in Texas when you need him!
That doesn't explain how Silicon valley powered, owned by the city of Santa Clara, can provide electricity at 18c/kwh while the next city over PG&E charges 48c/kwh
Has Santa Clara diversified their energy and Sunnyvale did not?
I have worked as an engineer is private and public power utilities and there is not a significant difference in how efficiently things get done. All human orgs are basically the same, when you get down to the people actually doing the work. Private utilities have all the security of a public utility so the 'profit margin' is not really an everyday focus at the worker bees level in the way that it is in actual private industry.
Having seen the sausage being made in both, I would say that private utilities are very little for the additional $$$ they extra t for shareholders. I would just as soon see all power production and transmission nationalized.
I remember when water was privatized in Brisbane, Australia - instantly noticing the jump in my bill. It's clear that privatizing infrastructure like water & electricity doesn't benefit consumers (unless they are somehow investors). I understand that Amsterdam is privatizing water as well. But what can be done about this? Is the only path as consumers is to become ruthless capitalists for our own survival? I wonder where this cycle ends?
It can be stopped by voters making smart decisions during elections.
Whether that happens, is up to the electorate.
One of the reasons I left academia: in a different context my colleagues would all know to shout "correlation not causation!", "conditioning on a collider", and "no true control group!"
But if they saw this they'd immediately like, subscribe, and share broadly with positive commentary.
Now look at how much they invested in keeping the infrastructure up to date. The ones I know about are very good at the rent seeking portion but when it comes to (preventive) maintenance and capacity planning they are terrible.
Some research suggests that clustering simply on public vs private is correlation not causation. Many public utilities in the USA are clustered around hydro electric system and dense urban system whilst private utilities pick up the more expensive to run and traditionally less well serviced markets.
Do we also have a study on the quality of service provided by investor-owned vs public providers?
I mean, both sides claim to have the better quality, so let's see who actually has it.
Is anyone surprised by the profit motive?
Privatization of utilities was always bad idea. We had a lot of it in Poland, mostly driven by "govt owning it is communism, we want to get away from what" and it just made it near universally worse
Natural monopolies are always the first suggestions to keep public owned. And you can't have 2 water suppliers piping into your apartment from the source
You can. It is just that the costs of pipes (wires) are so high that you can't both charge a reasonable price and pay for the pipes. This is why most farms are on private wells - $10k to drill a well is cheaper over 50 years than pipes to each farm. (Many Iowa farms are on public water not a well because wells in those parts tend to not produce enough water for a house's need - and they pay a lot of money per month to pay for those pipes)
This is why we say utilities are a natural monopoly. If you have the pipes/wires in place and even a little paid off you can undercut and competitor until they are bankrupt.
Even if there is only one set of pipes under the street, the owner of those pipes is constrained from acting in a predatory way if the market is free. They are disciplined by potential competition (if prices too high or lets the water quality drop, it suddenly becomes financially viable for a competitor to dig a rival pipe, or set up localized system, or offering water trucking to your site).
Under a government-granted monopoly, that threat is legally banned (except for maybe water trucking)
Government granted monopolies are granted under oversight and regulation that would be extreme in any other scenario. Many of them don't even get to set prices. No discipline or market forces needed. The regulators just regulate predatory action.
In your example no one is going to dig a rival pipe because you can't just go around installing pipes under other people's roads and land. The permission to do that is granted to a single entity by the government, further reinforcing the natural monopoly. There is no situation where it is economically feasible to lay more pipe when you have no right to do that.
You are correct, but only at unrealistic levels of bad. A potential competitor risks that they lower the prices after the have dug in the pipes and that is enough that the competitor is bankrupt. Even if water quality is the issue, it is easier and cheaper for the incumbent to fix the issue than for you to dig in new pipes. Only in the case where the incumbent has worn out pipes that all need to be replaced at once (unlikely - pipes last a long time and we have had good success relining pipes in many cases: leaving only a minority that need expensive replacement at any one time).
Because the bad has to be unrealistically bad before someone can compete nobody sane will.
>only at unrealistic levels of bad
Bad water or water service is not unrealistic.
It took FIVE YEARS for Flint Michigan's water to be re-declared "safe to drink without a filter." The solution involved FEMA and the National Guard.
That can't have been the best way.
Even if allowed it would take more than 5 years for a private company to put in enough pipes to compete in Flint.
Right, I'd rather lose 15% of cost to waste/inefficiency than increase cost by 25% to put money in someone's pocket.
This guy thinks waste in government is only 15%.
At the low end, the GAO estimates of federal spending, 3-7% is fraud, 3% is improper payments, 7-10%+ is legal but wasteful (e.g. zombie programs) - totaling 13-20%.
In the middle, DOGE (don't smite me, just citing multiple sources) estimated 30-33% was waste.
And at the high end, the American public according to Gallup polling perceives 59% to be waste. https://www.cato.org/blog/americans-say-federal-govt-wastes-...
NEE profit margin is currently 40.37% https://www.macrotrends.net/stocks/charts/NEE/nextera-energy...
From that, NEE pays 43.72% in dividends.
So we can say that 17.64% of the amount paid for energy to this company is wasted in dividends ALONE.
Just to put some numbers on the waste on the private side.
Is this a serious take? Citations from DOGE and American perception?
Privatization supporters seem to always use waste as a boogeyman, but never the inevitable profitmaxxing for management and shareholders.
Utilities have made $200B+ in profit since 2021, new report says - https://www.utilitydive.com/news/utilities-have-made-200b-in... - March 17th, 2026
That's $200B that could've, in some parts, gone into grid investment and lower electrical costs. Instead, it's the rake for financially engineering being a middleman.
I'm confident this is solved for in the long term with more coop and muni ownership of grids, alongside rapid deployment of solar and batteries so folks can go off grid if they want, as is happening across Pakistan [1] [2]; in the interim, it's annoying though, and for those who cannot afford to be squeezed for these profits, painful.
[1] https://news.ycombinator.com/item?id=46070915
[2] https://news.ycombinator.com/item?id=50145248
(non profit, coop, and muni grids can go to the bond market just like an investor owned utility to borrow for grid investment capital, so this is not an excuse for investor owned utilities to exist)
https://www.electric.coop/electric-cooperative-fact-sheet | https://www.electric.coop/wp-content/uploads/2026/09/2026_NC... [pdf version]
> Privatization supporters seem to always use waste as a boogeyman, but never the inevitable profitmaxxing for management and shareholders
That’s because under capitalism, waste and inefficiency are touted as the ultimate evil. Making profit is the entire purpose of the whole system, so it’s inherently good, and “the right thing”.
Especially in the US, even talking about a reduction in profit is akin to blasphemy, and quickly gets one labeled a quack.
It's unfortunate, for sure. Luckily, clean tech manufacturing and deployment will eventually outpace the ability to capture energy for returns [1] [2]. China currently has enough solar PV manufacturing capacity for double current global demand, and battery manufacturing capacity is catching up. Prices will keep coming down, and eventually everyone who wants to go off the grid and has space for batteries and solar should be able to.
Just like China is cramming down legacy auto export TAM through their EV exports (BYD has surpassed Ford in international sales as of this year, as is constrained by not having enough marine vessels to export more), solar and batteries will come for investor owned utilities as well.
[1] https://ember-energy.org/data/china-cleantech-exports-data-e...
[2] https://www.iea.org/reports/solar-pv-global-supply-chains/ex...
Alternate headline: "Public utilities subsidize 19% of electricity charges."
It's not even that though. Looks like public utilities are only offered in areas where those utilities are cheap to provide or abundant, and private utilities fill in a gap in harder to reach areas.
The study even points this out as a foot-note but then focuses on rate of price increase versus nominal price. It should not come as a surprise that in areas where utilities are less abundant the price will increase faster than in areas where that same utility is plentiful.
That’s roughly the opposite of the development of electric utilities in the US. The IOUs owned dense urban areas and refused to electrify further out. It was only the rise of public municipal utilities that got them to go to the states, implement the regulatory compact, be granted rate of return, etc., and then they began building out more.
That is the historic situation yes. However it doesn't change how things are today. the municipal utilities that remain have lower costs because they don't have the more expensive structures.
Or "investor owned utilities pay out c-level bonuses and dividends equal to 23% of actual costs"
Some of it goes to bonuses and dividends, but 23% is a really big number.
I think a big part of that number is risk, dividends are tied to risk too.
The very idea of investing is that you take risks in exchange for profits. That is, if it fails, you lose your capital, if it succeeds, you become richer. A public provider doesn't work the same way, risk is covered by taxpayer money. If it fails, taxpayers foot the bill, if it succeeds, cheaper service.
NEE profit margin is currently 40.37% https://www.macrotrends.net/stocks/charts/NEE/nextera-energy...
From that, NEE pays 43.72% in dividends.
If we multiply these two numbers, we end up at 17.64% in dividends ALONE.
23% is not a really big number by a long shot.
Alternate headline: "Profit-seeking organizations seek profit"