BIG COAL--ADDING INSULL TO INJURY (2) In 1892, barely a year after SAMUEL INSULL took over CHICAGO EDISON, INSULL stunned a gathering of power industry executives by telling them that he believed that competition among power companies was “economically wrong”, largely because the cost of building duplicate wires and power plants was economically untenable. In fact, INSULL argued, power companies were “natural monopolies” that should be regulated by the state. Given the predatory instincts of nineteenth-century industrialists, state regulation was a radical idea indeed! It took INSULL’S peers a while to see that submitting to regulation was a brilliant solution to the industry’s problems. By the time INSULL proposed this idea, he had done enough business with the notoriously corrupt CHICAGO political machine to understand that the “regulators” he was proposing would merely go through the motions of ‘overseeing’ electric power utilities. Any regulator who got too pushy could be (and was) quickly disposed of. By accepting the yoke of state regulation, INSULL killed the drive for municipally owned power systems that had been growing around the country and that was the biggest challenge to the industry. It also gave power pioneers a huge advantage, cutting out the threat posed by entrepreneurial upstarts, who had no hope of competing against these “natural monopolies”, which enjoyed special legal privileges and protections. And the power pioneers could achieve all this while pretending to work in the interest of the people. “No shrewder piece of political humbuggery and downright fraud has ever been placed upon the statute books,” MILWAUKEE mayor DANIEL HOAN said in 1907. “It’s supposed to be legislation for the people. In fact, it’s legislation for the power oligarchy.” Important as this move was, it wasn’t the end of INSULL’S genius. To most operators, establishing a monopoly was desirable because it would enable them to charge higher prices and thus make more money. But INSULL was interested in establishing a monopoly for the opposite reason: instead of raising prices, he would use his monopoly power to CUT them. --FROM ‘BIG COAL: The Dirty Secret Behind America’s Energy Future’, By JEFF GOODELL
Posted on: Sun, 07 Dec 2014 13:27:24 +0000
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