S. Argun | Red Phoenix correspondent | Washington–

Electricity prices are rising at rates greater than general inflation. The causes are chiefly the rise in power-sucking data centers, necessary to fuel the ongoing market speculation in “artificial intelligence” and the need to expand the electricity grid to accommodate them, in addition to new generation sources. With the passage of the Trump Administration’s “Big Beautiful Bill,” the problem of soaring rates is expected to worsen. While the causes are claimed to be the cost of generation, lack of utility coordination, and necessary grid upgrades, these stories and analyses miss a critical cause of rising rates: the investor-owned utility, the profit motive. 

The investor-owned utility is a mutation of the neoliberal era, following the privatization of the energy generation sector. The usual propaganda about public inefficiency or municipal graft and a belief in the efficiency of the private market led to a wave of utility privatization in the 1970s, experimented with in Chile after the installation of fascist dictator Augusto Pinochet and at the behest of the “Chicago Boys” clique of neoliberal philosophers and ideologues and spreading through the capitalist world since. When the move to privatization occurred, even the neoliberal zealots realized they would have to regulate the new firms extensively to prevent abuse, as utilities can only function well in a monopolistic (that is, centralized) form. The rates paid by customers had to be regulated to prevent the new private entities from using their ownership of the entire grid to price-gouge customers. The new private utility would use the ratepayer’s money to build out and upgrade their system through capital investments to make a tidy profit, the rate of which was also meant to be regulated. No profits would be made on the money paid for the operations and maintenance (O&M) of the grid. Under this harmonious and virtuous framework, graft is reduced, the grid can grow, rates go down, and capital can grow itself. 

Less often advertised are privatization’s vices. The expected savings for ratepayers have failed to materialize, with costs now rising nationwide. Next is neglect, as the splitting of budgets into profitable capital expenditures and unprofitable O&M creates a perverse incentive to build out the grid even as the existing one decays. Last, and greatest, is avarice; market privatization was the cause of the California Energy Crisis. Enron worked to privatize and deregulate California’s energy market, and within four years blackouts rolled across California, energy prices tripled, and the state was forced to sign energy contracts at outrageous cost. The crisis was manufactured from nothing but the greedy, grasping whim of a capital firm, working with the state to ensure profit above all. Nor are these failings confined to electric grids, as water and sewage utilities were also privatized in the United Kingdom, with disastrous results including leaking pipes, sewage dumps, and financial insolvency. Nor is the UK’s privatization scheme an outlier as many towns that sell their utility systems come to regret it and frequently pay dearly to re-municipalize it. 

The move to privatization has made capital very happy, and is making them happier each day. The rate of return on equity for investor-owned utilities nationwide has risen over the past three decades, reaching a mouthwatering seven percentage points above the return of treasury bonds, and a far higher rate than should be allowed to compensate them for grid expansion. In short, these “IOUs” have already entered the realm of rent-seeking, simply collecting money for the right to use electricity, or water, or have sewage carried away. Now as the grid needs to undergo massive expansion to accommodate non-fossil energy sources and general decarbonization, the grid the vast majority of Americans rely on to live, and need to rely on further to prevent or even survive a worsening climate, we find it is under the control of voracious equity firms, who already gouge and neglect their customers. 

The outcome of all this is very predictable. Utility shutoffs have been rising since the turn of the decade. Utility companies are lobbying to be allowed to shut off power in emergencies, such as a global pandemic if the millions of people now cast out of employment are incidentally unable to pay their bills. This is to say nothing of the 27 states that already allow utilities to cook you alive during a heat wave – an ever-present threat with climate change – if you fail to pay your bill. These are all the sad, monstrous, and utterly predictable costs of letting capital into utilities, and everything we can see suggests they will worsen. 

No capital enters any industry – not aircraft, food, steelmaking, or utilities – because they’re drawn to it by the needs it will meet. Each and every capital is in one industry – the industry of enriching and growing capital. Everything else is detail, and the details only matter as much as they affect the rate of return. Utilities are extremely attractive to capital because they function as monopolies, yes, but also because they serve needs. People rely on water, electricity, and sewage so much that they’ll pay almost anything they have to get what they need, similar to lifesaving medical care. That is why they need to be controlled by the state, by a socialist state which suffers no private class of self-serving electricity barons or Sewer Seigneurs to even sell out basic needs to, as well as to ensure they actually serve society’s needs, via the workers who build the power grid, who harvest fuel for it, and maintain our sewage lines, also have completely accessibility and transparency in the day-to-day management of production, and don’t become a cash cow for parasitic capital. 

Categories: Economy, Environment, U.S. News