« The Economist on the Budget Deficit | Main | Anatole France »

August 30, 2005

Steven Bodzin Writes About the Repeal of the Public Utility Holding Companies Act

Steven Bodzin writes about the dismantling of another part of the New Deal: the PUHCA, the Third New Deal's attempt to diminish the potential for monopoly power in utilities. I've never been able to figure out whether the economies of scale the PUHCA's opponents claimed were there really were there in the 1930s. It's pretty clear to me, however, that today large-scale utility mergers would be "market power" mergers rather than "economic efficiency" mergers.

A Tiny Revolution reads the LA Times and summarizes:

A Tiny Revolution: Actual Journalism: The Los Angeles Times has been running some actual journalism, thanks to their reporter Steven Bodzin. One of Bodzin's most interesting recent stories is about the repeal of an obscure but genuinely important law regulating utilities:

What enabled the regulators to shield Portland General Electric from the Enron debacle was the Public Utility Holding Company Act, a New Deal-era federal law requiring companies that owned electric utilities either to incorporate in the state where they sell power or to accept tight regulation by the federal Securities and Exchange Commission...

But after more than 20 years of agitation from industry financiers and free-market advocates, the 1935 law will be repealed when President Bush signs the energy bill, which he is expected to do Monday at a ceremony in Albuquerque.

Wall Street analysts and energy industry observers expect the repeal to accelerate the industry's consolidation, with more utilities being bought by national -- and even foreign -- electricity companies and by oil, construction and service companies.

Basic utilities like electricity aren't commodities like apples or DVD players. People can choose to buy oranges instead of apples, or choose not to buy a DVD player. But hospitals can't choose not light their operating rooms, and grocery stores can't chose not to refrigerate meat. That's why, left to their own devices, corporations will use their leverage to gouge their customers as hard and long as they can. That's just good business.... Eventually, once enough billions have been stolen and enough people have died, we'll reregulate everything. Then we'll slowly forgot why we did it and deregulate everything again around 2075.

Yes: I am an old, grumpy man. But you should still read all of Steven Bodzin's article.

P.S.: Yes, Steven Bodzin made very welcome and lively contributions to my American Economic History course last spring.

Posted by DeLong at August 30, 2005 02:02 PM