Comment by bradchris | Hacker News Reader

Comment by bradchris | Hacker News Reader

I don’t understand much about transmission lines as an industry, but I really have never understood why California allows what seems like essentially a duopoly to manage its electrical grid, especially around its major population centers like LA and SF. The rates aren’t low, they’re routinely linked to natural disasters, and they’re slow to respond to customer complaints.

It seems as absurd to me as if one single company were to own all of a city’s water pipe infrastructure. Maybe that’s actually common too, I just don’t understand why. If it’s simply because municipalities sold them off long ago for short-term windfalls, my next question is why we as a state allow that, in the same sense that we don’t allow selling state parks without major hullabaloo.

Granted, I’m covered by LADWP, the nation’s largest municipal water and power utility that even predates this form of the city’s government itself, and I’ve really only had outstanding service with them (I noticed a small leak with a water main forming a minor puddle on a side street and within an hour someone was out there fixing it), so I guess I am wondering what the case for privatized utilities even is.

Could someone who knows better than I please explain why the state or local municipalities don’t/can’t manage their grid?

There's probably more accurate answers, but I'd say they don't because they don't want the responsibility internally and/or don't have the funding, and can't because they're too ineptly run to do anything properly.

Having spent a good part of my career consulting for state and local governments in IT, it's an easy generalization to say they're mostly all incompetently run, and not something most are equipped to support from the top down. Even when run well, they're not well funded, and if some of the people actually are good, they're probably too busy fighting and offsetting the incompetent ones to do any good.

The flip side is I've also worked for several power companies over the years, and they're not often much better. They're at times better run and better people, but so dragged back by bureaucracy and politics they can't get out of their own way to do any good if they wanted to.

Sure, I get that having a profit-motive is one way the market can incentivize efficiency. But without the ability for any real competition (i.e. there will only ever be one set of main transmission wires or water pipes for an area, we won’t ever have two completely distinct physical competitor networks serving the same identical addresses) does that still hold?

For a private company in sole ownership of a utility, how does the market keep the incentive to cost-cut (i.e. increase profit by reducing expenditures on things like timely customer service or deferring capex) in check versus actually improving service and efficiency above “it still works” ? It’s not like any individual could choose another provider of electricity, so therefore it’s not much of a market at all.

What is the motive to do anything other than rent-seek without a competitor to incentivize them to improve?

At least municipal and state leaders have some sort of accountability in that they could get voted out if it’s going wrong on their watch. Meanwhile PG&E was rewarding its shareholders by raising rates and deferring maintenance for paying out high dividends rather than re-investing in itself, which seems like exactly the opposite thing the public would want to incentivize.

I live in one of the places with good power. Have lived in my present building for 20 years, only two power failures in that time, and of those happened because unknown persons really wanted to cut power to my neighbour. The price for this reliability is said to be up to about ten times of what the Americans pay. I appreciate the reliability personally, but I imagine that if you went to your customers saying "this part of your power bill is going to increase by 1000%" some of them might scream at you.

I've also done some contract work for a couple of power companies, and don't have the impression that they tried to maximise profit. Rather, they seemed to see themselves as safe, zero-risk, low-profit places. As someone who'd never make either large profits or losses. The teams I dealt with didn't seem like people who would face down screaming customers. Safe, low-risk, boring, staid, always profitable, never headline makers.

Assuming that the Californians are like the teams I dealt with, I would tend to explain their present state with a reluctance to offend the customers.

There was a large discussion about city-owned utilities yesterday: https://news.ycombinator.com/item?id=42975492 Personally I thought this was the best comment: https://news.ycombinator.com/item?id=42985484

Natural monopolies benefit from scale. For water you need treatment and then sewage. Unless you can pump ground water there and then, you facilities are cheaper per unit when they scale up at least to certain point.

So for same continuous geographical area having single water utility is lot of sense.

Same mostly goes for power.

With internet, the actual infra is so small and affordable that only the last bit to consumer is expensive per unit. So in sanely operated markets you can have multiple operators at same time and competition works.

Yup, I get the economies of scale, hence why I wonder why we don’t use statewide utilities for more rural areas and municipal utilities for denser metro areas that support it (e.g. LADWP for Los Angeles).

But even if you have a private company capitalize on these efficiencies of scale, there’s no competition to force them to do anything other than the bare minimum (“provide this utility, today, above some bare minimum acceptability standard that doesn’t cause the state to nationalize is” with barely an afterthought toward what maintenance capex looks down the line), and even then Edison and PG&E still can’t hop over the low bar they set for themselves.

I think best balance is private company majority or wholly owned by local or higher government. Sadly such companies are easy sells to fund budget shortfalls for year or two. And failures are only seen when those elected are out.

I think a large part of it is ideological. A lot people are convinced that private companies are cheaper and more efficient than the government when it comes to just about anything and won't listen to any nuance.

It is simply part of the neoliberal ethos. It stems from a circular belief that the private sector (the much-vaunted “Market”) is by definition better than having things run publicly. Even if selling things into the private sector results in bad outcomes which everyone could see coming a mile off it’s not the fault of the Market, it’s the fault of not applying the Market deeply enough.

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