Absolute Power Corrupting Our Energy System

John Farrell:

Well, the first thing we need to do is when you have any kind of addiction problem is to admit that you have a problem and to admit that the problem here is a structural problem with having these utilities. These private companies have monopoly and captive customers and monopoly control over our energy system.

Reggie Rucker:

Hello and welcome back to another episode of Building Local Power. I’m your co-host, Reggie Rucker here with my co-host as well as Luke Gannon. What’s up Luke?

Luke Gannon:

Hey Reggie. I can’t believe it’s already August.

Reggie Rucker:

Don’t do that.

Luke Gannon:

I know, I know. It’s really crazy. How are you?

Reggie Rucker:

I’m doing well. I’m still dealing with this thigh contusion from basketball. I need to stop playing, but I can’t stop playing, so anyways, but I’m doing okay. I’m doing okay. But that’s not why we’re here, we’re here to talk to John Farrell. We have another special summer edition of Building Local Power where we’re rebooting an episode from the archives and freshen it up with the latest insights from our team here at ILSR.

Luke Gannon:

In 2019, we aired an episode titled Energy Monopolies, the Dark Side of the Electricity Business, which discussed how monopoly utilities are undercutting the health and safety of Americans by lobbying against environmental regulations. Recently, ILSR’s John Farrell released a tremendous report titled Upcharge: Hidden Costs of Electric Utility Monopoly Power, which details the true costs of the Current Utility Model. We are welcoming John to the show today to talk about this new report and how we will free ourselves from the energy utility overlords. Welcome back, John.

John Farrell:

Well, thanks for having me.

Luke Gannon:

All right, so John, let’s get into it. At a high level, can you walk us through the argument you are making in your new report?

John Farrell:

Yeah, the key is really in the title, which is we pay an enormous cost environmentally, financially, economically for maintaining a monopoly system of delivering electricity service. Have for over 100 years when it’s really no longer the most efficient, it allows these incumbent utilities to exercise market power to prevent competition that would result in cleaner energy, more affordable energy, more resilient and reliable energy, and they also, because they’re monopolies and because they have all these captive customers, are able to use that market power to build enormous political power to prevent us from making changes that would be necessary to address climate change, to address equity in the electricity sector, to make energy more affordable, and of course to take advantage of huge new federal legislation, the Inflation Reduction Act, to fight climate change. If we want to be successful in those things, we can’t leave unturned the stone that is the structure of our electricity system.

Luke Gannon:

And then could you walk us through some of those environmental, financial and economic costs?

John Farrell:

Yeah, the biggest cost is from having these incumbent utilities is the hindrance to our ability to fight climate change. Utilities were decades ago invested in fighting the way in which their industry was contributing to climate change. In fact, utilities were some of the first to know that greenhouse gases caused climate change, and then they were some of the first to start to obscure the science to cast doubt upon it, recognizing that they had liability there. And rather than own up to it and to try to address it with solutions, they decided to, as so many companies have, try to obfuscate and to change the political conversation in order to hide their own liability in that situation. And so they’ve continued to hinder that, unfortunately, even though we now have cost-effective renewable energy resources like solar and wind, utilities continue to be a barrier to us building more of that, whether it’s through long distance transmission lines or being able to put solar on rooftops.

We also have huge costs in terms of paying for electricity that utilities routinely are jacking up rates in order to pay for infrastructure that may or may not actually be necessary because they’re invested in 100-year-old model of delivering electricity where they own everything and they control everything that doesn’t recognize the cost-effectiveness of distributed solar on rooftops, built on churches and invested in by many community groups. We’re losing out on resilience because utilities like PG&E in California have doubled down on giving more money to shareholders rather than investing in basic maintenance, causing catastrophic wildfires that have cost human life, that have cost billions in property damage and then have increased the rates that customers pay them for electricity.

And finally, this affordability crisis is leading to utilities literally cutting people off from this essential service in order to both protect their revenue and because they are allowed to by public regulators that have failed to do their job and to hold these utilities accountable. And I think that’s the final cost, is that crisis of confidence in our democracy and in our government to effectively oversee these private corporations, these monopoly corporations that have this power over this essential public service.

Reggie Rucker:

In the episode you’re about to hear from 2019, you and David discussed the significant political influence wielded by these utility companies, and at the time you provided numerous examples from across the country where these monopoly utilities had leveraged their political power to exploit customers. And this was also a topic that was a major focus in your report. Can you talk about is this situation getting worse? Is it getting better at all? Is it being exposed more? How has that conversation changed and how are people thinking about that specific aspect of the monopoly power that these utilities wield?

John Farrell:

In the time since we recorded that original episode, we’ve had instances such as the Ohio Utility FirstEnergy spent $60 million to bribe public officials to pass a law that gave them billions of dollars in subsidies for their existing power plants, that they would have to be paid by their captive customers. And while some of that law has been undone because of the federal prosecution and investigation of that incident, customers there are still paying millions and millions of dollars to the utility as a result of that, so no, we absolutely have not solved the problem.

I’ll just give one other example because it’s so shocking, but in Florida, in Jacksonville, it is a publicly owned city utility and the privately owned monopoly, Florida Power & Light that serves most of the rest of the state wanted to buy it, and in order to try to buy it they were running up against the fact there was at least one very vocal city council member who was opposed to the buyout. And so they tried to bribe him with a job to get him to leave the city council in order that he would no longer be there to vote against them doing the takeover. And this is just one of many shady things that Florida Power & Light has done over the years, politically speaking, so no, the situation is unfortunately not getting any better. We have seen an increase in interest in state legislators in addressing this problem.

David’s organization, Energy and Policy Institute, has worked with many other advocacy groups on bills often called the Rate Payer Protection Act that are trying to address some of the ways in which utilities wield that power using, for example, charging their lobbying dollars back to customers, charging their customers for the fees to be part of their trade organizations, all things that are benefits to their shareholders and not necessarily to their customers. But ultimately it doesn’t dial down the amount of political power the utility has, it just means they have to pay a little bit more in order to maintain that political power out of their shareholder pocket. Ultimately, all the money comes from us though, and so we’re really not getting there.

Luke Gannon:

John, you’re starting to get into the answer to this next question, but clearly we have a huge uphill battle with these monopoly utility companies, so how do we begin to curb this problem? What are some of the solutions that you lay out in the report?

John Farrell:

Well, the first thing we need to do is when you have any kind of addiction problem is to admit that you have a problem and to admit that the problem here is a structural problem with having these utilities. These private companies have monopoly and captive customers and monopoly control over our energy system. If we can’t do that, then we’re really never going to get to the solutions that we need because we’re going to continue to have private companies that have a major conflict of interest in how they manage the electricity system, between how they profit and what we actually need from the system, whether that’s about climate change or affordability. And we also are going to have the issue where they are able to wield their power to hinder their competitors, so even though competitors have products that are cost-effective alternatives like rooftop solar and batteries, they’re often hindered from doing that because the utility is in control of the way that those projects connect to the grid.

How do we solve it is the question that you asked, and I’d love to talk about it. Number one, admit that there’s a problem. Number two, we need to actually restructure the system. Right now in two thirds of our states, the way that the utility system works is that the utility company not only has a monopoly about who you can buy electricity from, they’re the only one, but they also own all the poles and wires, the transmission lines, the power plants, everything from the power plant down to that meter on the side of your house that spins and tells them how much electricity you’ve used. And the truth is the one real monopoly we still have is some entity… We need some entity to manage that flow of electrons every hour of the day, every minute, every second, because it always has to be in balance. That is the engineering marvel of our electricity system, is that reliability means we have to manage that all the time, but it does not mean that that entity that does that management needs to own any of the assets on the grid.

That’s one of the things is to say, “Hey, all those poles and wires and power plants can be owned by some other entity.” In some cases it can be competitive, maybe it’s a publicly owned entity instead, but we need to separate that ownership and the management of that grid system, the management of how the electrons flow needs to be and ought to be a public entity because this is a public service and we don’t need a markup on making sure that power is reliable, we just need it to be reliable. But that then opens the door for competition for all sorts of things because that entity is going to need all sorts of things to make sure that power is reliable, it needs people to produce electricity, it needs people to be willing to turn off power at certain times of day to make it work better, to plug in their cars on a hot sunny day at noon when solar energy systems are producing lots of electricity.

We need opportunities for entrepreneurs, for innovators to come in and to offer those kinds of services, and so that would be the real major structural change, is we break up the power of the utility companies by restructuring the system, by diminishing the power of any one piece of the system and by giving it to different entities, some competitive, some publicly owned, and then we ensure that everybody has a chance to participate in that system.

Reggie Rucker:

You’ve been at this for a while, well over a decade, and we’re going to replay this episode from five years ago, and so I wanted you to reflect on what keeps you hopeful as you look back to the fights you’ve been a part of over the last decade plus, and how do you see us getting to a point that five years from now when we’re digging this episode up from the archives, we’re not still dealing with the same frustrations, the same battles that were making progress. How do you think we make that progress and move forward?

John Farrell:

I’ll give you two examples that keep me hopeful. One is just that I feel like a decade ago, maybe even five years ago, it often felt like we were a voice in the wilderness noting the power of utilities and how we needed to confront them, and I now hear those words coming out of other people’s mouths. I hear other people using the term monopoly when they’re filing in regulatory dockets and really illustrating even to those public regulators, this is a problem because of the structure of the system, not just this is a problem, like I can’t get my solar connected to the grid, I need you to fix something. But the reason I’m having this problem is that this utility is exercising power in a monopoly way and in an abusive way.

And speaking of that, the other thing that gives me hope is the federal revival of antitrust and anti-monopoly scrutiny that we’ve seen from the Federal Trade Commission and the Department of Justice, whether it’s about mergers between cell phone carriers or airlines, whether it’s investigations into Amazon or Facebook or Apple and the tech companies and the way that they’ve exercised what they call their platform monopolies. The problem here is the same, and what really gives me hope is that we can talk to folks who have worked in that side of the business, people who’ve never even thought about electricity or electric utilities, but who really understand monopoly and competition in our economy, and they’re starting to say, “Hey, this is an issue that’s important. This is an economic sector that’s really important.”

It’s $360 billion a year industry and it’s essential and it undergirds much of the rest of our industry because electricity is a crucial supply for how we run our lives, and so that’s what gives me hope is that I think as people have been reawakening to the power of our government to help protect us from the power of big corporations, they’re realizing that this is something that we can do in the utility sector as well. I have hope that we’re going to find many friends who want to work with us on this problem of confronting monopoly power.

Reggie Rucker:

Well, thanks so much for this, John. This was really helpful, and congratulations. I know you’ve been working on this, this upcharge report for a really long time, and so I was happy to see it, the finished product, and it’s an incredible contribution to the work, so congratulations.

John Farrell:

No one is happier that it’s done than I am.

Luke Gannon:

We are now turning to the second half of this show where we are resurfacing our 2019 episode, Energy Monopolies: The Dark Side of the Electricity Business. Stay tuned.

John Farrell:

This week we’re talking about exposing the power of monopoly companies. David Pomerantz is the executive director of the Energy and Policy Institute, a national nonprofit organization that exposes how monopoly utility companies exercise outsized power in deciding our energy future. As a big fan of his work, I’m delighted to ask him to help us understand how utility companies have become so powerful, how they use this power, and what lessons we can learn from David’s work to manage monopolies in the rest of the American economy. David, welcome to Building Local Power.

David Pomerantz:

Thank you so much for having me, John.

John Farrell:

Well, I have always really admired the work that you do. Big follower on social media as you guys release more information about what utilities are up to. Your website is chock-full of information about utility shenanigans, for lack of a better term, but I want to help people understand a little bit about how the area in which you and I work focused on energy is related to, but not quite the same as the rest of the economy. We at ILSR talk a lot about monopoly power across the economy in banking and social media and internet. You focus on the utility sector, electric and gas utilities generally. Could you explain a little bit about how monopolies in energy are different from ones like in banking or social media?

David Pomerantz:

I think one of the key ways that energy monopolies, electric monopolies are a little bit different is they are providing a service that we really can’t live without in the modern economy. Just as an example, if you are fed up with Facebook’s practices as a monopoly, you don’t like some of their maybe political spending or you don’t like things that Facebook is doing to control the market of social media, you can always delete your account on Facebook. With electricity, it’s different. Everybody has to have electricity and they really only have one choice. In many parts of the country at least, people only can buy electricity from a single provider that has been granted a monopoly by their state.

Because of that, it’s really important that those monopolies are tightly regulated by the government to make sure that they’re providing electricity at fair prices to make sure that they’re not doing too much harm to the environment or the climate, and unfortunately, these electric monopolies have over the course of the last century, while they’ve had these monopolies over the energy that they sell, they’ve also built political monopolies. And so in most states, the monopoly electric utilities are some of the most powerful political players in that state. They control many of the levers of government almost like puppeteers, and that makes it really hard for them to be effectively regulated in the public interest.

John Farrell:

Well, it’s really helpful, because I think many people don’t realize that a lot of the monopolies we have, a lot of the big corporations were built up through acquisitions and mergers and buyouts and competing with other businesses until they just got really big. Although of course, as we also talk about the federal government and state governments often have given them permission to grow large by approving those mergers, but at least they began by competing. And this is obviously different here. We know that in the energy business, thanks to this description, that utilities generally have minimal or no competition and obviously that could be very profitable for them. You alluded to this already in terms of political power. Could you give us an example of how a utility can use that profitability and protection from competition to block competitors, to block other folks from being able to compete in this market?

David Pomerantz:

The example that’s probably most in the news these days that your listeners might be most familiar with is how utilities have blocked their customers from turning toward rooftop solar power. I should say historically, there was probably a time in the beginning of the last century where it actually did make sense for utilities to have monopolies over parts of the electric grid, certainly over building the poles and wires as the electricity grid was building out. Those were places where it made sense for utilities to have monopolies. And even at times over the generation of electricity when the grid was being built up in the early 20th century and we were for the first time building these large power plants at scale, it made sense to give companies monopolies to do that, but now we’re in a world in the 21st century where everything is totally different.

And now having these companies build these massive power plants with huge risks of cost overruns, which by the way happen to be absolute killers for our climate, that’s not only environmentally problematic, it’s no longer the most cost-effective way to do things. And we have had this amazing technological revolution where customers have a host of new technologies at their fingertips that they can adopt. The most obvious one is rooftop solar, but there’s also energy efficiency and ways that customers can control when they use electricity. Unfortunately, these incumbent big electric monopolies, they see all that as a threat. One great example of that is in the sunny State of Arizona, a natural place for rooftop solar and local solar to grow really quickly, and starting about 10 years ago, it was growing really quickly and that became incredibly scary to a company called Arizona Public Service, which is the biggest investor-owned monopoly electric utility in Arizona.

APS is one of those companies, like I mentioned before, that has done an incredibly effective job at really buying up the entire political ecosystem of Arizona. The governor of Arizona, many of the state’s legislators, elements of both parties unfortunately, the Republican and Democratic parties of Arizona, and APS’s direct regulators, the Public Utility Commission in Arizona are all deeply indebted to the company’s campaign contributions and the various ways that it has exerted influence over the state’s political system. And when this solar threat started to rear its head and scare the executives at APS, a few years ago they took action and they appealed to their regulators in the PUC called the Arizona Corporation Commission and asked them to change the way people pay their electricity rates in ways that would make rooftop solar less economic. It was very contentious, but because of the political dominance that this company enjoys, they were able to get that change through, and unfortunately, we saw rooftop solar adoption rates really fall off a cliff after those changes happened.

That’s one of those examples where unfortunately we have this amazing new technology in distributed solar, it can save people money on their bills, it can help protect the environment and the climate by avoiding the need for these companies to build more polluting gas plants and making it easier for them to shut down coal plants sooner. And as you know, John, and have done amazing work to document, it can help grow local economies, but unfortunately there are these very powerful companies who see that technology as a threat, and so they have done everything they can to stifle that competition to protect their profit margin for their investors on Wall Street.

John Farrell:

I was interested in you maybe giving a couple other examples so people can understand the full scope of this. One of this is around competitive technology, but we also have issues with existing power plants, so old power plants that have been operating for a long time. And there’s some pretty crazy stuff going down in Ohio right now around old power plants. I was hoping you could explain a little bit there because there’s a couple of things I find interesting. One is you have these large power plants that the utility is looking for subsidies for, but you also have this funny layer of the market was competitive for a while, the state decided to make the marketplace more competitive and at first utilities really liked that, and then as it actually became a competitive market and profit margins went down, now they seem to be going back and begging for monopoly protection again. Can you just describe a little bit about what’s going on in Ohio for folks who might not be familiar?

David Pomerantz:

I think you put that really well, John. A lot of these companies like to talk about the value of competition and free markets until the free markets turn against them, and then pretty quickly they start talking frankly in ways that sound a lot more like socialism than free market ideology or a command and control economy. And so that’s really what’s happened in Ohio. There’s a company called FirstEnergy, which has seen unbelievable financial struggles in recent years. It actually spun off part of itself, which filed for Chapter 11 bankruptcy recently. The reason for its economic problems is that they made some big bets on types of power generation, including burning coal and their existing nuclear power plants that turns out are no longer the cheapest way to make electricity, and increasingly it’s not really even close. They’ve been beaten by gas and more recently are getting crushed, particularly in the Midwest by wind energy.

And then on top of all that, the entire economy, and Ohio is certainly a part of this, is getting more efficient, which means people are using less electricity to do the same things, which is good. It saves homes and businesses money across the economy, but it does mean that some of those existing power plants that companies like FirstEnergy are running start coming under pressure, and so that’s what’s happened there. And FirstEnergy is another company with a lot of political power. It has contributed lots of money in the most recent gubernatorial election in Ohio, the CEO of FirstEnergy spent lavishly on the campaign and inauguration of the current governor of Ohio who obviously has a lot of say over these matters. And so now what FirstEnergy is trying to do is get itself a bailout, so the company is trying to get a law passed in Ohio that would essentially rob money from Ohioan’s electric bills every month to the tune of hundreds of millions of dollars statewide that would just basically be a direct transfer of wealth from the people of Ohio to FirstEnergy.

Now, nominally that money is to keep a couple of nuclear plants online that are not doing well in the marketplace, but it’s not clear that that company actually needs that money. You could also make the argument that Ohio’s chosen more of a market system for how electricity is produced, and if those plants can’t compete, then they should be shut down and replaced with more competitive options. But even if you believe that it makes sense to keep those plants alive, it shouldn’t really be done on the backs of customers. That’s something that FirstEnergy shareholders could pick on if they think that they want to keep those assets going. And then the whole situation gets much worse because once FirstEnergy saw that opportunity to use its political influence to keep its plants open in that rent-seeking behavior, there’s basically been a pile on from some of the other incumbent players in the state.

Now this policy, which has passed one house of the Ohio State Legislature but not the other yet, it’s called HB6 in the Ohio House, it’s been expanded so that it would also bail out a large coal burning facility, which is a major, major polluter for Ohio and really the entire region. And on top of that, to try to sweeten the deal for some legislators who have been trying to gut the policies that Ohio does have to encourage renewable energy and energy efficiency, the legislation would also kill those standards. They’re not the strongest renewable energy or energy efficiency standards in the country, and hard right conservatives and the fossil fuel industry has been trying to gut those standards for several years now and failing, but this is probably the most serious threat that they’ve seen. And those standards frankly, need to be much higher and stronger. It would be a shame to see them finally wiped out basically because these polluting industries are trying to protect their profits.

And it’s really an incredible irony because you have these people who are, and the companies behind it, they are trying to use an argument against renewable energy and energy efficiency standards that says, “Well, there are mandates. This is lefty control of the economy and we need more of a free market,” and making that free market argument, and then literally at the exact same time out of the other side of their mouth, they’re asking for a bailout for polluting nuclear and coal plants, which can’t survive in the free market. It’s really a stunning bit of hypocrisy, but it’s one that unfortunately greased by a whole lot of political contributions and millions of dollars in lobbying that FirstEnergy has spent over the last few months they have had some traction with.

John Farrell:

One of the things that I just wanted to note for folks who are listening about the renewable energy and energy efficiency mandates is that especially with energy efficiency mandates, these things save everybody money except for utility shareholders because it lowers the amount of energy that has to be produced on the system at large. Not only do they help individuals save money because that helps provide money for rebates for efficient appliances or for home insulation, but it also saves everybody money collectively by requiring less, as you said, polluting power plants on the grid. And renewable energy standards have been shown in multiple studies to generally save people money as well because renewable energy has turned out to be incredibly inexpensive, and at this point, as you mentioned before, wind power in the Midwest is much cheaper than pretty much any fossil fuel alternative, so these are not only are they arguing against these in a very, as you said, perverse way because they’re also asking for mandates to support polluting power plants, but they’re also arguing against things that save everybody money.

David Pomerantz:

The only thing I would add is that for many decades, these companies and a whole bunch of conventional wisdom have tried to convince people that our environmental goals and our economic goals and what’s good for consumers are in conflict somehow, and maybe once upon a time that was true, but it’s certainly not true now in a place like Ohio. The companies who are trying to literally rob their customers created a direct transfer of wealth. They’re doing that so that they can keep polluting and the policies that will reduce pollution and catalyze clean energy and energy efficiency, those are proven to save people money, so no matter what perspective you come from, whether you’re coming at it from a consumer rights perspective, an anti-monopoly perspective or a climate or environmental perspective, this legislation that FirstEnergy has been backing is a disaster.

John Farrell:

I wanted to actually clarify one thing here. We’ve talked about these monopoly companies having a lot of power, but one thing we haven’t explained just as thoroughly as maybe people might need is there are different kinds of electric utilities. Some of them are actually publicly owned by a city or they are member owned, like they’re a cooperative ownership structure. One thing that’s important to understand about electric utilities is they are private companies. A lot of them are listed on a stock exchange and they have shareholders, and a lot of the tension that we have here is actually about the interest, as you said, the interest for the shareholders, for example, in keeping open a polluting power plant and the customers who don’t see the financial benefit of their stock going up on Wall Street, but really are only going to see benefits as they’re reflected on energy bills.

I want to use that and pivot into this next question about how monopoly utilities are using their money to advocate against the interest of their customers so that there’s the legislative pieces like in Ohio or in Arizona the regulatory pieces, but you also have something else that Energy and Policy Institute has been covering recently. It was called UARG, and I’m going to let you spell that out and explain how utilities and their shareholders were using this group to undercut clean air and water for all Americans.

David Pomerantz:

UARG is the Utility Air Regulatory Group, U-A-R-G, and if your listeners haven’t heard of the Utility Air Regulatory Group, that would be very normal because this is a group that has very deliberately kept a low profile over the last four decades that it’s been in existence. They don’t have a website, they don’t really have a headquarters that you can go visit. What the Utility Air Regulatory Group does is it is a group of lawyers who represent the whole host of electric utilities, mostly investor-owned electric utilities, like you just mentioned, John, although there are a couple of other kinds of utilities in there or that were in there. It’s a bit of a spoiler alert, but the Utility Air Regulatory Group thankfully disbanded in scandal in the last month actually, and I’m happy to walk through what led to that, but maybe I’ll go back to the beginning.

The Utility Air Regulatory Group was formed by utilities in the late 1970s with basically one express purpose. It was formed after Congress passed the Clean Air Act, which is designed to protect Americans’ health and safety from air pollution. And that was a scary thing for utilities who thought it might limit their ability to build the kinds of power plants and other infrastructure that they make profit on, and so to undermine the Clean Air Act and the EPA, which writes rules and public health standards in accordance with the Clean Air Act, utilities formed this group, UARG. And for the last four decades, UARG has very quietly existed in the shadows trying to undermine and attack the Clean Air Act and the EPA’s enforcement of the Clean Air Act. Some of the kinds of things they do includes mainly litigation, so they sue the EPA constantly. Whenever you hear about the EPA getting sued for things like President Obama’s Clean Power Plan or other public health and safety rules, including from past Republican presidents as well as Democratic presidents, usually the plaintiffs in those lawsuits is the Utility Air Regulatory Group.

What makes this really nasty and part of what the Energy and Policy Institute, what we focus on and trying to expose is not only do these companies pay the lawyers who constitute UARG to file lawsuits that result in the public being less safe and healthy, but they’re actually doing that with our money. I’ll give an example. One of the rules that Utility Air Regulatory Group has tried to kill is commonly known as the mercury rule, and it basically exists to keep mercury that’s emitted when we burn coal out of our water and the fish we eat and our air. And the reason that’s important is mercury is a really powerful neurotoxin, gets into kids’ bloods and into their brains, and it affects their ability for their brains to develop appropriately.

That’s really widely accepted and nobody disputes that, but that’s not good enough for utilities who wanted to keep burning coal throughout the last several decades, so they sued to try to stop and weaken that rule from taking place. And the money that they used to do that was actually coming out of, a couple of cents at a time coming out of your electric bills every month, so you would think that since these companies are paying the UARG lawyers to protect their shareholders profits, that their shareholders at least would have to pay for that. And in a world where unfortunately we don’t have a lot of control over how companies are able to spend their money to influence politics, there might not be a lot we could do to stop that, but in fact, it’s even worse than that.

These monopoly utilities very quietly when they go to their regulators at the state level and they ask for all the money they need to operate their utility, so that’s supposed to be for things like trimming trees next to power lines so we don’t have outages, building infrastructure, paying linemen to walk the power lines and do maintenance and keep us safe. When they want to recoup those costs, they have to go to regulators and get permission to do that in a rate case. Well, what utilities would do is in the fine print of those rate cases, they would slip in all the money they were paying the lawyers at the utility or regulatory group, which means that for many electric utility customers around the country, every time they pay their bill every month for the last four decades potentially, a few cents out of that bill was going to pay lawyers to the EPA to attack rules that are designed to keep us safe.

Utilities, they’re trying to make us less healthy and they’re using our money to do it, and unfortunately, there’s not a lot that the average person can do about it. It’s very difficult and expensive to intervene in one of those rate cases, usually need a lawyer to do it. That’s the only way that we can challenge that, and John, it goes back to your original point about the problems with having these monopoly electric utilities. If Facebook or Google is suing to stop clean Air rules or Walmart is, at least you have the choice to go take your business somewhere else, but we don’t have that choice with electricity if we have a monopoly utility.

John Farrell:

All right, we’re going to take a short break. When we come back, we’re going to talk to David about how Energy and Policy Institute helps Americans understand monopoly power, how do they find out this stuff, and also to understand a little bit more about why state regulators haven’t been able to stop companies from doing this as we’ve already learned a little bit about and what opportunities we have to intervene to do something about the way monopoly utilities are using our resources.

Thank you so much for listening to this episode of Building Local Power with David Pomerantz, executive director of Energy and Policy Institute. Hey, do you think you’d be a great guest on Building Local Power? Are you dying to tell Chris Mitchell what he could do better? Wanted to share some love? Email us at [email protected]. You can also send your love with a small donation. If you listen to other podcasts, you might hear about a mattress company or a meal delivery service, but the Institute for Local Self-Reliance is a national organization that supports local economies, so we don’t accept national advertising.

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Okay, we’re back. David, let’s talk a little bit about what Energy and Policy Institute does to help Americans understand monopoly power. How do you find out all this stuff about UARG or whatever these secretive groups that utilities are part of or the way that they are spending their money or our money to undercut this stuff? How does Energy and Policy Institute understand this?

David Pomerantz:

Well, John, a lot of the answers are hiding in plain sight and I think one of the most, I think powerful things unfortunately that utilities have done over the years is convinced us all not to pay attention to them. Their hope is as long as they basically can keep the lights on most of the time, which they don’t always do, but as long as they can do that relatively well and as long as they can avoid shocking us with really high bills, which sometimes they still do that too, but they certainly try not to, then we’ll mostly look in the other direction. But they’ve avoided, I think in the last couple of decades at least, a lot of the scrutiny that other polluting industries like the oil industry or the coal industry have gotten, and so that’s what Energy and Policy Institute is trying to change.

Even though the regulators that are supposed to make sure they are not gouging customers and hurting the environment don’t always get everything right, in the process they do require utilities to put a whole lot of stuff on paper. And one of the things we do is comb through that and try to find examples of where utilities are hurting people, hurting their customers, hurting the environment, and just try to translate that for people. A lot of this stuff is pretty wonky, it can be pretty technical. We are not technical experts the way that I think, John, you are a great resource on a lot of this stuff and there are many others out there, but we have tried to carve out a role for us to explain what utilities are doing and then look for the proof.

We’re looking in their regulatory filings. We’re doing a lot of things that regular people could do if they have an interest in doing it, and that includes looking at how utilities spend money in political campaigns. We’re looking at how they lobby, which there’s often a paper trail of, so we’re trying to use every kind of public source of information that we can to document utilities behavior and then just explain it to people hopefully in a way that makes sense.

John Farrell:

I want to come back to something that you were talking about, public utilities commissions, public service commissions. I think it was in our Arizona example where unfortunately you were describing how the utility has had a lot of influence over picking the commissioners that are supposed to oversee it. All the states that have monopoly utilities have some sort of body, public body like this, a public service commission, et cetera. Why haven’t these regulators stopped utilities from all these anti-customer practices? For example, there was a lot of what EPI was covering, I think it was last year, was around Dominion Energy in Virginia, which has been up to any number of high jinks around not refunding money to customers, and then when they were supposed to refund money, I think they said something like, “Well, how about instead of refunding it, we’ll just spend it again and make a profit on it a second time?” Why aren’t people at the Virginia Public Utilities Commission or Public Service Commission stopping this kind of behavior?

David Pomerantz:

The first thing that people need to understand is in their state, how those public utility commissioners are chosen. And there are a few ways. In most states they’re appointed by a governor. Then there are about a dozen states where the utility commissioners are elected by the public, and then there are a couple of states that have some different things going on. Virginia is one that you named where, and this is relatively unique, the public utility commissioners are actually chosen by the state legislature. And to your example, unfortunately over the years, Dominion has for many years running been the very top campaign contributor to legislators in Virginia, and that’s writ large, but if you look at the leaders of the important committees in the Virginia legislature, Dominion just has given them hundreds and hundreds of thousands of dollars to basically buy their compliance, and that puts a lot of pressure on those legislators when they go ahead and select a utility commissioner to make sure they’re picking somebody that Dominion approves of and that Dominion thinks will help them with their profit.

But in all these places, once you understand that, it does mean that people have a chance to do something about that. In states where public utility commissioners are elected, people can obviously vote, but they can also organize to make sure that the candidates running for the public utility commission are not taking money from utilities, that they’re not taking money from groups that are funded by utilities and try to obscure that. And in the states where governors pick public utility commissioners, people can make sure that the choices that those governors make becomes a political issue for them. I would just say in most cases, these monopoly utilities tend to really get what they want when the public doesn’t pay any attention, and when people start to pay attention to what they’re doing, to their political influence, to their agenda, which has been anti-energy democracy, anti-distributed solar, and in most cases, although I should say this is starting to change for a few utilities that are moving in a different direction, their agenda has been pro-fossil fuel.

And so the more people pay attention to that and make it into an issue for their leaders and their politicians and sometimes for the regulators themselves directly, the harder it becomes for utilities to do what they’re doing under cover of darkness and the greater the chances that people will get regulation in the public interest. For these public utility commissions I think the first thing we need to do is put the public back into the public utility commission. And thankfully even in the last few months, we’ve seen some real progress there and some commissions that are starting to do a better job holding utilities accountable in the public interest.

John Farrell:

Do you have… I think, David, it would be really nice to be able to share one of those examples here so people get a sense for, hey, if I actually do something in this space, there is a precedent that things will improve.

David Pomerantz:

I’ve got a couple of examples of that. One is in Arizona where they have an elected utility commission and a commission that has been really the epicenter of a whole lot of scandal over the last four or five years. The company who I mentioned earlier, Arizona Public Service, we recently learned, spent over $10 million in dark money. Money they basically routed through groups that they tried to keep secret back in 2014 to pick the very regulators that made those anti-rooftop solar decisions. A couple of years later, they also raised rates on all of APS’s customers. There’s been a backlash to that, which is really good news, and so in this most recent election cycle in 2018, there was so much scandal around APS’s influence that for the first time in the last three elections, APS actually sat that election cycle out. They didn’t spend money on the candidates that people assumed were their preferred candidates.

And I think the reason they did that is because there had been so much scandal and their reputation had become so toxic that Republicans and Democrats didn’t want to be associated with the monopoly utility anymore. And in the wake of that election, several of the regulators on the Arizona Corporation Commission, including people from both parties, a Republican and a Democrat, have really tried to bring some more accountability into play. I don’t agree with everything that those commissioners have done, but they have tried to force APS to account for its political activity over the years. They’re trying to crack down on how APS is spending its rate payers money on politics, and they are starting to explore ways where they can challenge a lot of the things that APS has done in recent years that are really bad for customers, including trying to build gas plants that its customers don’t need.

I think some of the commissioners are taking a look at issues around rooftop solar and interested in doing that, so other commissioners are interested in looking at how they could bring more competition into Arizona. That’s a place where unfortunately, APS still does have a lot of political power, but there have been changes afoot, I think, and part of that is because a lot of people have taken action and organized and made these issues more political. Another example is in South Carolina where one of the utilities unfortunately spent billions and billions of their customers dollars basically to build a very expensive hole in the ground, and they were trying to build a nuclear power plant that spiraled completely out of control, it’s something they never should have built in the first place, and they actually had to abandon the project even after they’d spent multiple billions of dollars. In the fallout of that scandal there were new public utility commissioners who have been appointed and elected.

They are looking at the monopoly utilities in South Carolina with a much more critical eye. In the case of another utility, Duke Energy, that was asking for really obscene rate hikes on customers, they were asking to increase the fixed part of customer’s bills dramatically in a way that was higher than almost any other utilities around the country have done. And in response that public utility commission, first of all, they said no to many of those asks. They also actually cut Duke Energy’s CEO’s salary significantly, at least the amount of it that was paid by South Carolina rate payers, in a way to send a signal to that company that some of the things they’d been doing in the past to try to take advantage of their customers we’re not going to work any more under this new public utility commission. We have seen a number of utility regulators around the country in the last few months who are really taking a more critical approach and really, like I said before, trying to put the public interest back into the public utility commissions.

John Farrell:

Well, I was thinking as you were talking, David, about the work that you’re doing, and it puts me in mind of the slogan the Washington Post has adopted in the last couple of years about Democracy Dies in Darkness, and that a lot of what you’re doing is uncovering the things that have hidden in darkness, whether it’s UARG or these other things. You’ve already alluded to this a little bit in terms of what we can do about this. You mentioned paying attention, getting people to pay attention, holding politicians accountable for when they’re involved in the appointment or election of the regulators that oversee utilities, whether that’s gubernatorial candidates, whether it’s state legislatures or in the case of many states where commissioners are elected. Do you have other suggestions for things that people should do in order to help confront this monopoly problem in the utility sector?

David Pomerantz:

I do, and I think I have a really, what will hopefully be a very hopeful message for your listeners and fans of energy democracy on this front in terms of what they can do. There’s a lot that is happening where let’s say if your concerns are driven by environmental concerns or climate change, which is why I come to this work, there’s a lot that’s happening in Washington D.C. and in the Trump administration that is very concerning obviously, and it can be hard to know where to start. How do you have an influence over, as one person, over what’s happening in Congress or in the White House? I don’t think that’s always true though at the state level, so these public utility commissions, they’re pretty sleepy. They meet all the time, the public does not always show up.

And call me naive, but I actually think if people are engaged in that process, what we’ve seen in recent months and years is that you can make a big difference there. And so I have a couple pieces of advice. The first is just find out the basics about the public utility commission in your state. Where is it? Who serves on it? How are they appointed? And then look for ways that you can get involved. This can be hard stuff and somewhat technical, and I think it’s probably not the easiest thing in the world as one person to just get engaged in, but there are tons of groups. There are consumer advocacy groups, there are citizen utility boards, there are many environmental groups that have ways of engaging in that public utility commission process. They can tell you when there are hearings that you can show up to to testify. They can offer some guidance about how you can make a difference there.

And I’ll give one more plug about a very specific idea that we’ve seen really take off in the last year or so. John, you talked before about Dominion Energy in Virginia, and that’s one place where we’ve seen… One of the amazing responses to Dominion’s political power has been a movement to ask people running for office in Virginia to sign a pledge that they would not accept campaign contributions from monopoly utilities. There are a lot of people who feel like that our campaign finance system is generally broken and politicians probably shouldn’t be taking money from any corporation, and I’m sympathetic to that view, but monopoly electric utilities is a great place to start. They’re monopolies, like I said before, they’re companies that people have no choice but to patronize. They have unbelievable political power right now, and they have really high stakes in terms of they’re very heavily regulated and it’s really important to them to hold office. It’s the perfect place to start to try to get money out of politics, and we see an unbelievable success with that effort.

Virginia is a great example where over a dozen of the freshman legislators who were elected in 2017, in November 2017 in Virginia signed a pledge that they would not accept any money from monopoly electric utilities and more, including several incumbents have signed that pledge since then. And we’re now reaching the point in Virginia where there’s assumed pressure as soon as anybody announces they’re running for any office in the state that they’re going to be asked and will need to have a pretty good answer for whether they are going to take campaign contributions from monopoly electric utilities. That’s an effort that I think can happen and work in any part of the country. It’s completely non-partisan. I think people who are Democrats, Republicans and anywhere in between those all would probably agree that these monopoly companies should not be allowed to buy our politicians, and so that’d be one specific idea that we’ve been very encouraged to see catch on, and I would encourage folks to check out.

John Farrell:

We often end this podcast, David, with asking our guest for reading recommendation. It doesn’t have to be topic related, although it can be, but is there anything good that you’ve read recently? It could be a magazine article, it could be a book that you would like to recommend.

David Pomerantz:

I’ll take the easy out first and certainly encourage folks to check out our website for the Energy and Policy Institute, which is energyandpolicy.org, all one word. And we’ve got lots of great articles there about monopoly utilities, their political power and their efforts to undermine the public interests. And then in terms of a magazine article on this topic, there’s a great one that was in The Nation last month and the headline to search for is The Energy Industry’s Secret Campaign to Get Us to Build More Power Plants. And it’s about how even as the energy market has changed and actually moved more toward renewable energy, monopoly utilities have deployed these very deceptive scams essentially to try to feign public support for the gas plants they want to build. And it’s a great article, it’s really well documented investigative reporting, so yeah, would encourage folks to check that out in The Nation.

John Farrell:

We’ll definitely have links to both those sites, The Nation’s article and of course energyandpolicy.org on our show page. David, thank you so much for joining me today. Really great to hear about how you are exposing the shenanigans of monopoly utilities and giving people some power to take the power back.

David Pomerantz:

Thanks, John, and thank you for all the work that ILSR does.

John Farrell:

Thank you so much for tuning into Building Local Power. This is John Farrell, ILSR co-director. I was speaking with David Pomerantz, executive director of the Energy and Policy Institute about how utility companies have become so powerful, how they use this power, and what lessons we can learn from David’s work to manage monopolies in the rest of the American economy. You can see links to the Energy and Policy Institute and to his recommended article in The Nation on the podcast show page. While you’re at our website, you can also find more than 60 past episodes of the Building Local Power Podcast and show us some love with a contribution to help cover the cost of producing the podcast. You can also help us out by rating this podcast and sharing it with your friends on iTunes or wherever you find your podcasts, or just drop us a line at [email protected]. This show is produced by Lisa Gonzales and Hibba Meraay. Our theme music is Funk Interlude by Dysfunction_AL. Please join us next time in Building Local Power.

• 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.
• Energy Monopolies: The Dark Side of the Electricity Business (Episode 74) – John and David discuss how electric utility companies have become so powerful and how they use this power to protect their profits rather than the interests of their customers.
• ILSR’s Community Power Map: Explore ILSR’s interactive map of 18 state policies that help or hinder local clean energy action.
• Freeing the Grid Map: Freeing the Grid is a joint initiative of the Interstate Renewable Energy Council (IREC) and Vote Solar that grades states on specific policies that help to increase clean energy adoption and access to the grid.