Law & Principles
Jonathan Small | December 11, 2023
Government monopolies require regulation
“Private” businesses that are given monopolies typically want to have their cake and eat it too. Thus, a major utility in Oklahoma has sought to impose huge rate increases on consumers while still not having to compete for those customers.
This situation highlights the one time that regulation is truly necessary. In the private market, where private companies compete for customers, most government regulation is either unnecessary at best or counterproductive at worst. Because of market forces, companies that fail to deliver quality service at affordable prices lose market share to competitors. But that doesn’t happen to government facilitated-and-controlled monopolies, such as utility companies.
Public Service Company of Oklahoma (PSO) requested that the Oklahoma Corporation Commission approve a base rate increase of $294.5 million, which translated into an average monthly residential increase of $14. The Corporation Commission appeared prepared to authorize an increase of $5.35, but then Attorney General Gentner Drummond filed motions arguing that the rate increase should be no more than $3.57.
PSO sought the huge rate increase, arguing it was necessary due to the aftermath of Winter Storm Uri in February 2021.
But one of the main lessons of Uri was that monopolies, such as utilities, were unprepared to maintain service in part because they faced no real financial consequence for failure. Instead, they were prepared to impose significant rate increases on the same customers left without power during Uri due to the utility’s poor management.
Oklahomans are not the only consumers facing such abuse. The devastating Hawaii wildfires that recently killed so many people in that state were the result, in part, of utilities spending money on wind-power efforts rather than mitigating wildfire risk from power lines.
Although they are technically private entities, utilities are effectively government-run businesses given monopoly control of a market. That’s a combination in which the customer is not the average citizen, but politicians. And the incentives of that system benefit the utility owners, not the average Oklahoman.
In September 2022, a report by the Alliance for Electrical Restructuring in Oklahoma showed that electricity rates in Oklahoma surged by 49% from June 2021 to June 2022. Oklahoma went from having the most affordable electricity rates in the nation to having the 18th-highest costs among the 50 states. By July 2023, a WalletHub report found Oklahoma had the sixth-most-expensive electricity rates in the nation.
Many conservatives view “regulation” as a dirty word, and rightfully so. But the one area where regulation is not only necessary, but also must be the most intrusive, is in an environment where the government has granted a monopoly.
Jonathan Small, C.P.A., serves as President and joined the staff in December of 2010. Previously, Jonathan served as a budget analyst for the Oklahoma Office of State Finance, as a fiscal policy analyst and research analyst for the Oklahoma House of Representatives, and as director of government affairs for the Oklahoma Insurance Department. Small’s work includes co-authoring “Economics 101” with Dr. Arthur Laffer and Dr. Wayne Winegarden, and his policy expertise has been referenced by The Oklahoman, the Tulsa World, National Review, the L.A. Times, The Hill, the Wall Street Journal and the Huffington Post. His weekly column “Free Market Friday” is published by the Journal Record and syndicated in 27 markets. A recipient of the American Legislative Exchange Council’s prestigious Private Sector Member of the Year award, Small is nationally recognized for his work to promote free markets, limited government and innovative public policy reforms. Jonathan holds a B.A. in Accounting from the University of Central Oklahoma and is a Certified Public Accountant.