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Free Homework Pass Monopoly Utilities

The Southern Co. makes billion-dollar decisions that affect millions of people in Georgia, yet it has attracted little political scrutiny - until now.

Leaders of the Atlanta Tea Party are challenging Southern Co. subsidiary Georgia Power over the monopoly's reluctance to increase its use of solar power, the ballooning costs of building a new nuclear power plant and even its legal right to monopoly status.

The group's action in Georgia seems relatively rare among the loosely linked tea party organizations nationally.

Other tea party groups have condemned the adoption of "smart" utility meters - which transmit information about customer usage - due to concerns that they would intrude on customers' privacy, or have broadly backed less reliance on foreign energy. But relatively few have endorsed so specific an energy platform in their own backyards, much less promised to campaign on it.

"It certainly isn't anything personal, but one of our core values is promoting the free-market system," said Julianne Thompson, a co-founder of the Atlanta Tea Party.

The electricity market in Georgia is not a free market. State law gives electric utilities, including Georgia Power, exclusive rights to serve customers in designated areas of the state. Most customers cannot choose their provider.

While monopolies have more power to charge higher prices than firms in competitive markets, there are times when it makes sense to allow them if their prices are regulated.

It would be more expensive to build more than one system of electric wires or natural gas pipelines to deliver power and fuel to every home in a state. Customers are better off if just one system is built and maintained, as long as the company that runs the system is prohibited by regulators from using its monopoly power to drive up prices.

In many states, including Texas and most of the Northeast, power delivery is regulated, but customers can choose who provides their electricity. Customers in those states can choose from companies that provide such options as renewable power or a slate of pricing options, including fixed rates, rates that vary with market fluctuations, or rates that vary based on when during the day power is used.

Georgia Power makes a natural political foil for the tea party. A 2011 poll conducted by Yale University and George Mason University found that tea party members were far more likely than Democrats, Republicans or independents to distrust central authority and strongly opposed energy policies that raise costs, even if there are other benefits.

Yale University researcher Anthony Leiserowitz, who worked on the poll, said he was not surprised local tea party supporters might challenge a monopoly.

"That totally taps into that same sense that there are these big, institutional forces against which you're a little guy and you need to rebel," he said.

Utility officials say they welcome the involvement of tea party groups.

"We listen carefully to the concerns and ideas of the Tea Party, as well as all other organizations that represent the diverse opinions of Georgians," company spokesman Jacob Hawkins said in a statement.

The tea party locally has proved successful at getting its supporters to pressure Georgia's leaders into action. Thompson's group was part of a coalition that leaned on reluctant Republicans to pass limits on Statehouse lobbying, and they are working on a voter identification and education project ahead of the 2014 elections to increase their clout and boost turnout.

Earlier this month, Debbie Dooley, another co-founder of the Atlanta Tea Party, urged the state's elected utility regulators on the Public Service Commission, all Republicans, to force Georgia Power to use more solar energy. The commission is currently debating whether to approve Georgia Power's latest plan for meeting the state's long-term energy needs.

Dooley actually wants to go much further. She says if her organization viewed it as politically possible, it would support repealing a law granting monopoly rights to utilities.

"They can protect their business and say, `We don't want the competition.' They have veto power," Dooley said. "It would be like Wal-Mart saying, `Hey we don't want Kmart here. We don't want them to build.'"

Dooley personally endorsed a Libertarian challenger against Commissioner Stan Wise, a Republican who she said had gotten too close to Georgia Power.

But Wise said he questions how many people Dooley actually represents, and he doubts the solar projects she champions are economical.

"I just almost have to think it's a kneejerk reaction that says if it's solar, it has to be good," Wise said. "And they haven't done their homework on this extraordinary level of subsidy that this program brings to the table."

The tea party groups are also targeting Georgia Power over the rising cost to build two new nuclear reactors at Plant Vogtle. The utility's share of the project was supposed to cost $6.1 billion, but Georgia Power is seeking permission to raise its budget to $6.85 billion - and cautioned that costs may still increase.

Dooley's group is particularly peeved that Georgia lawmakers are allowing the utility to charge its customers for the project's finance costs before it produces power. This year, tea party members supported legislation from Rep. Jeff Chapman, R-Brunswick, that would trim the utility's profits if it goes over budget building the plant. Chapman's bill did not pass, though it could be considered next year.

Georgia Power argues the plant makes economic sense in the long run. The utility says the nuclear plant will be immune to swings in natural gas prices and will not be affected by limits on carbon emissions if they are enacted in the years to come.

Dooley said she supports nuclear power but wants more accountability. Under state law, Georgia Power's customers must pay for the nuclear plant unless regulators find its costs were unreasonable.

"They are guaranteed to make a profit on the cost overruns," Dooley said. "What incentive is there to come in on budget, on time?"

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Associated Press Energy Writer Jonathan Fahey in New York contributed to this report.

Follow Ray Henry on Twitter: http://twitter.com/rhenryAP .

An Economist Plays Monopoly

A few days ago, I appeared on NPR Morning Edition talking about Monopoly (the game, not the market form).

Until then I hadn’t thought much about the economics of the game (which I played very often as a child, with our sons and for the past five years with our grandchildren).

Monopoly teaches us some useful economic lessons:

  1. The very first event illustrates the diversity of people’s utility functions – I like the “Top Hat” piece, but others may prefer the racing car or the Scotty dog.
  2. With only $1500 to start, you can’t buy everything you land on. This requires constrained utility maximization. (I never buy railroads or utilities early in the game, since I believe the payoff per dollar is less than buying a regular property.)
  3. You need to optimize dynamically, since you should retain money to build houses and keep enough money to avoid bankruptcy if you land on others’ properties before they land on yours.