What the Monopoly Utility Model Really Costs Us

  • May 30, 2024
  • John Farrell
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  • Report
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    A zoomed-in and sepia-toned image of a Monopoly board, where the word
    The title page of Upcharge: Hidden Costs of Electric Utility Monopoly Power, by John Farrell, Co-Director of the Institute for Local Self-Reliance
    Click to read the full report

    ILSR’s new report, Upcharge: Hidden Costs of Electric Utility Monopoly Power, is a deep dive into the problems associated with the 100-year-old model granting private companies exclusive power over the public resource of electricity – and a call for structural reforms to restore competition and equilibrium to the sector.

    The report details the true costs of the current utility model – to communities, the climate, and our democracy – and makes the case for breaking up the private monopoly, restoring competition to most of the electricity system, and removing the natural monopoly of electricity distribution from profit-seeking hands.

    From accounting for 32% of the U.S.’s energy-related carbon emissions, to causing 171,000 pollution-linked deaths per year, to hiking electricity prices to record levels and triggering debilitating power shutoffs for low-income families, private utilities are responsible for many public issues.

    A beige-colored box with blue and orange lettering inside that reads: "What is a platform monopoly? A platform monopoly is a dominant company or small group of companies that uses its control over a platform or marketplace to gatekeep and hinder competition. Examples include Amazon, Google, and investor-owned utilities.

    Electric utilities meet the criteria for a “platform monopoly” because they use their exclusive control over their industry’s infrastructure – the electricity distribution grid – to obstruct competition and favor their own business. Utilities all over the country have been caught rigging bidding processes and manipulating contract negotiations to undermine competition. The report also shows how utilities use their control over consumer data to evade regulatory oversight and accountability.

    Unlike other platform monopolists Amazon and Google, electric utilities’ monopoly is government-granted and enforced – utility customers legally can’t deactivate or switch to a competitor. Utilities take full advantage of the captivity of their customers – pouring bill revenue into influencing lawmakers to protect the monopoly and allow steep rate hikes. Utilities also use their control of consumer data to further evade public oversight and accountability.

    An infographic titled "A vicious cycle" on a dark blue background, with a triangular figure in the center. At the top, a seesaw icon headed by the words "Utilities use their platform monopoly power to undermine competition and favor their own business." An orange arrow points down-right from the seesaw toward an icon of a stick-figure person straining under a heavy money bag. Next to that icon, the words "Utilities overcharge their captive customers to pad returns for shareholders." An orange arrow points left and across from the stick-figure icon toward a ballot-box icon, labeled "Utilities pour their profits into political activity to reinforce their monopoly and guarantee more profits." An orange arrow points from this ballot box icon up-right toward the seesaw icon, forming a triangle.

    The three-part solution to the ills of the monopoly utility model lies in changes to state and federal policy that target the monopoly itself. State and federal policymakers must work together to break up utility companies and restore competition to as much of the electricity system as possible. States should shift the natural monopoly of electricity distribution to non-profit, cooperative, or public entity control. Finally, historic harms imposed upon communities of color and low-income customers must be addressed through prioritized access to financing and bill relief.

    For more details, download the full report or start with the visual executive summary.

    This article originally posted at ilsr.org. For timely updates, follow John Farrell on Twitter, our energy work on Facebook, or sign up to get the Energy Democracy weekly update.

    Featured Photo Credit: Unsplash