In California, as in many (or most) states, the utilities are run as “government protected monopolies”.

It’s a very 20th-Century concept – the idea that in order to incentivize the investment needed to install and maintain the “lines going into your house”, the government needs to give a monopoly to the company doing it – so they can profit enough to be worthwhile.

That may have been true in the beginning, however these monopolies are almost always extended far beyond the useful payback period for the initial investment.

For example, think about the wires providing cable service to  your house.  They were likely installed decades ago, the cost of that installation has long been recovered from your monthly bill, and the current costs are largely driven by the need to maintain those lines as well as the associated costs with whatever switching devices and such are needed between “the main office” and your house.

The same situation existed with telephone service – AT&T was given a government-protected monopoly on phone service because they installed the lines to your house.

The “Telecommunications Act of 1996” opened that up, so any carrier that wanted to provide you with service could do that, using the existing lines, as long as they paid AT&T (or whatever company owned them) a fee for their part in installing and maintaining those lines.

As part of their deal in getting the monopoly over the physical wiring, that fee was managed by government oversight, in part to make sure it was simply not set at a value that was so high as to discourage competition.


WITH that, of course we saw the unleashing of real competition – multiple companies all vying for your business by providing their services at cheaper pricing and with (they say, of course) better service.

The end result is that the cost of land line phone service dropped from a fairly significant portion of the monthly budget to “almost nothing” in the grand scheme of things – because the ACTUAL cost of providing you with a connection for the few phone calls one made every day from home as close to zero…

In all free market transactions the price has little to do with cost in any way other than the fact that a company has to cover their cost in some way – plus an acceptable profit to keep in business.

In the case of a protected monopoly, of course “covering their cost” is up to interpretation.  Most such monopolies are in theory “regulated”, but that regulation is often done by boards that consist of ex executives who used to work in that industry – meaning they tend to be inclined to set the rules to benefit “their golfing buddies” who are still in that industry.

And “cost” includes costs of doing business like “paying shareholders huge dividends” as well as “paying executive management outsized salaries and bonuses”, as well as gold-plating any infrastructure development expenses.

It’s obvious – I mean, if  you were the CEO of a company that could simply pay your staff more (and claim it’s necessary to keep “the best and brightest”) as well as pay “whatever the contractor asked” to build a new plant – and in both cases to recoup that cost (plus your allowable profit percentage) you just had to go to your friends and ask for approval, what would you do?

And as a side effect if profit is defined as a particular percentage (call it 5%), then as your “cost” rises, the actual dollar amount of that percentage also rises – so you literally make more money by INCREASING the cost of everything you do rather than decreasing it.

Sweet deal, right?

There’s the problem….  You get it now, don’t you?