During the Great Depression, there were many pieces of legislation enacted to stimulate the economy, keep people working, and most importantly, keep people fed. The time for a great many of those regulations has come and gone and the world has evolved while the need for these programs has not.
The administration and regulation of the local co-op is one of those antiquated ideas which has outlived its usefulness. The birth of the rural co-op was ingenious and was meant to create jobs and eventually morphed into a means of controlling monopolies and fostering competition in the energy and telephone industries.
This leads to two questions: Are they really providing a buffer against monopolistic business practices? Do these regulations truly foster competition?
As to the first question, the answer will be in bad form as the question will be answered with a question. If the co-op, or municipality, is actually reselling the telephone service or power produced by another company, are they truly in business for themselves? If the provider in question doesn’t really produce the item they are selling, is the monopoly truly gone?
As for competition being fostered, well, that’s a fairly obvious query to answer. No, it doesn’t foster competition. In the American sense of business, competition involves the ability to shop around, to find the best price, and decide where to spend your money as a consumer. Competition is created by choice.
The city of Easley is a good example of this reseller model through Easley Combined Utilities. Addressing just the electricity the city “provides” to residents and businesses only, here is a glaring lack of competition in the system for the consumer.
Here is an actual comparison of an existing ECU customer, a downtown business, and the costs associated with outdated and fostered competition.
Duke Energy generates the electricity which is then sold to ECU and then sold once again downstream to the end-user. This particular business, just for electrical service, is charged $1,005.76 for the billing cycle ending June 3 by ECU. In comparison, if there was truly competition and the business was PERMITTED by law to deal directly with Duke Energy, that same bill would be $660.52.
Should that differential average out over a 12-month period, this business will have spent nearly $5,000 more had they been allowed a choice in providers.
Does the antiquated system of fostered competition in certain industries work?
You do the math and you will find that yes, it does, but only for some and it’s usually the business, not the consumer which benefits.