During Tropical Storm Isaias last month, more than 2 million households in the New York metro area lost power. Most got their power back on within a day, but 10,000 households went without power for over a week. Complaints about the slow return of service have led elected officials to call for investigations.
In New York City, the perceived tardiness of the response has served as a pretext for proposing a radical solution. Advocates on the left propose a government takeover of the energy grid, a process referred to as municipalization. New York City public advocate Jumaane Williams released a report recommending this step the day after Isaias dissipated, explaining why the city should add oversight of a complex electrical grid to the list of complicated systems it already mismanages.
Municipalization is a bad idea. It is predicated on the notion that utilities want to cut corners in order to create a profit for their shareholders, and that government, with no shareholders, would be immune to such pressures. Only government, with no profit motive, would thus have incentives to do the job properly and efficiently. Cost savings would be passed along to ratepayers.
The reality is quite different. Democratic Socialists may spurn the profit motive, but it motivates people to do their job. A utility that underperforms can fire its chief executive and anyone else who messes up—or it can reward them for doing a good job. When utility workers become government employees, however, they invariably get the government protections that go along with that. It becomes much harder to reward good performance or punish poor performance.
The argument that profit on a public good is immoral and represents theft from the consumer helped inspire the building of mass public housing in New York City in the 1930s. Without a private landlord, advocates maintained, all excess rent after funding operations could go into maintenance and beautification of Housing Authority properties. New York City Housing Authority housing would be self-sustaining because none of the profit would be diverted. To say that this theory didn’t prove out would be an understatement; NYCHA has been a fiscal basket case for decades.
Hiring effective public management to run power generation and transmission would be problematic for New York. Running a utility is a complicated job, typically handled by professionals with long experience in the industry. Were New York City to take over the electric grid, that appointment would become political. Sure, the position might go to the best-qualified candidate—but only if that candidate also supported the mayor and hadn’t given offense to any vital interest groups.
Besides, the city can’t simply confiscate its energy grid, as much as Mayor Bill de Blasio may yearn to do so. The city would have to buy out shareholders—including many local retirees living on fixed incomes—at a fair price. The idea of New York City borrowing billions of dollars to buy a utility when its budget is tens of billions of dollars in deficit is preposterous.
The recent history of municipalization efforts is not encouraging. A study published by Concentric Energy detailing the shortfalls of municipal-run utilities noted that, of the 60 municipalization efforts over the past 19 years, only nine government entities succeeded in buying their utility—and two of those ultimately sold it back.
None of this is to suggest that Consolidated Edison is perfect; the city should work with the utility to improve its performance. But Mayor de Blasio and Jumaane Williams should stop wasting people’s time talking about a city takeover of the electric company. That’s a pipedream, and not even a good one.
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