Nationalize the Power Companies?

MARCH 01, 1975 by ARCH BOOTH

Mr. Booth is president of the Chamber of Commerce of the United States. This article is from his Voice of Business column of December 16, 1974.

It’s no news to most people that the nation’s electric utilities are having big problems. The price of imported oil has soared, natural gas is running low, high-sulfur coal can’t be burned, low-sulfur coal can’t be mined, and the coal that is available is getting more expensive fast. Added to all of the above, the nuclear power plants that were supposed to be helping out by now are far behind schedule.

For all of these reasons, the cost of electricity has been going up steeply — and the tempers of consumers have been keeping pace.

The utilities have not caused the bad news, but it is their misfortune to be the bearer of it — in the form of their monthly bills. And some people are reacting much as did those ancient rulers who were inclined to behead a messenger bringing bad news.

Predictably, demagogic politicians have seen in this situation an opportunity to enlarge their empires. Cries are being heard for government takeovers of the elec­tric utilities.

 The presumption, of course, is that the government could do a more efficient job of providing power than the private companies.

But could it? The country’s largest electric power system is a Federal agency — the Tennessee Valley Authority. So, before we start nationalizing the private electric industry, it might be advisable to take a look at TVA.

First, TVA priced its electricity low and encouraged all-electric homes — a practice that environmentalists consider a waste of resources when a private company does it. Consequently, TVA serves more all-electric homes than any other electric utility.

Second, TVA let its vital coal reserves get danger­ously low while it waited for the price to come down. The price went up. Now the agency is frantically scrambling to scrape up enough to see it through the winter. And it doesn’t look as if it’ll make it.

TVA has already asked its biggest single customer —The Atomic Energy Commission — to accept a 50 per cent power cut. It was an offer the AEC couldn’t refuse.

TVA also appealed to its other customers to reduce power use by at least 20 per cent. The result was a five per cent reduction.

Now, TVA is talking about a mandatory five per cent power reduction. If that isn’t enough, the next step will be to cut off business and industrial users. After that will come "rotating brownouts," during which one-third of an area’s power will be cut on a rotating basis.

Clearly, government-run utilities are not immune either to management mistakes or to the effects of price increases in the fuel market. Of course, the government does have the ability to use tax revenue to paper over the gap between income and outgo. But that doesn’t really save the consumer money — it just takes it out of another pocket. And, government subsidies disguise the true cost of a product, which invariably leads to waste­ful and inefficient use of scarce resources.

Nationalize the power companies? Well, let’s put it this way: Would you want your electricity to be deliv­ered by the U.S. Postal Service?


March 1975

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