The Erosion of Public Control Over Public Utilities

Sandeep Vaheesan –

Cable Electricity Electrical Energy DistributionSince the 1970s, Congress and federal agencies have replaced regulator-established rates with market-derived pricing in many sectors of the U.S. economy. Electricity and natural gas are two such industries. Congress and the Federal Energy Regulatory Commission (FERC) have abolished regulated rates and instituted market-based pricing in a part of the electricity and gas supply chains. (At a simplified level, both industries have three segments: production, transmission, and distribution. Policymakers generally still treat the transmission and distribution functions as monopolistic.)

These legislative and regulatory decisions are premised on the belief that markets are superior to direct public control of rates and other terms of service. While this process is often described as “deregulation,” the term is a misnomer. This industrial restructuring is a transfer of discretionary authority from public bodies to private actors. Instead of structuring competitive markets in this new environment, the federal courts have defended private market power and helped scale back all public control of sellers and traders of electricity and gas. A case before the First Circuit (in which my Open Markets Institute colleagues and I filed an amicus brief in support of the plaintiffs) illustrates this theme.

In Breiding v. Eversource Energy, New England residents have accused two large utilities of violating antitrust and consumer protection laws by creating an artificial shortage of gas and engineering a chain of events that dramatically drove up the cost of electricity. The district court dismissed the plaintiffs’ complaint and expanded a judicial doctrine intended to protect the integrity of regulator-set rates to also insulate market-based prices from private lawsuits. This decision, which is consistent with rulings by other courts, grants gas producers, power generators, and traders the freedom to engage in exclusionary and other unfair practices. In electricity and gas, the net effect of legislative, regulatory, and judicial choices over the past 40 years has been a dramatic erosion of public control over public utilities.

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How Contemporary Antitrust Robs Workers of Power

Sandeep Vaheesan

Man Controlling Trade by Michael LantzThe political economist Albert Hirschman developed the idea that members of an organization can exercise power in two ways—through exit and voice. Market activity is associated with exit: consumers unhappy with the price or quality of service of their current wireless carrier can switch to a rival carrier offering lower rates or better service. Elections exemplify voice: voters can replace a corrupt or ineffective incumbent officeholder with a challenger promising to make the government work for ordinary people. For workers, both exit (joining a new employer) and voice (making demands of a current employer) are important. Despite the pro-worker aims of the framers of the Sherman and Clayton Acts, antitrust law today is an enemy of both exit and voice for workers.

For more than a generation, antitrust enforcers have permitted labor markets to become highly concentrated and have also interfered with the efforts of a large segment of workers to build collective power. Through their labor market actions, the Department of Justice (DOJ) and Federal Trade Commission (FTC) reinforce, rather than tame, corporate power. To create a progressive, pro-worker antitrust, legislators and policymakers must adopt a radically different vision for the field.

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Against the Cult of Competition

Sandeep Vaheesan –

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Competition is one of the talismanic words in law and economics and American life. It is often hailed as an unqualified good and touted as a solution to what ails society. The value of competition is endorsed across the ideological spectrum: Conservatives decry the lack of competition in schools and taxi cab services, while progressives highlight the dearth of competition among multinational corporations and call for a revival of antitrust law. Notwithstanding this trans-ideological commitment, we should not privilege competition at the expense of alternative means of structuring a democratic and egalitarian political economy. Three examples illustrate how competition is deficient as a general social organizing principle and should be promoted selectively, not categorically.

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