Sunday, May 01, 2005

Municipalization and Subsidized Utility Competition

The Taxpayers' Perspective

Leveling the playing field may be an overused phrase, but it can sometimes succinctly describe a complicated situation. As the following Cal-Tax research bulletin lays out in some detail, the unlevel playing field involved in competition between municipalities and investor-owned utilities in telecommunications and energy markets should concern all taxpayers. This inequity has various causes: taxpayer subsidies enjoyed by a municipal utility, a municipality's power to condemn privately owned facilities or to commandeer their transmission lines, and a municipality's access to preferential loans and low-price federal power.

Municipal utilities in California have been part of the landscape since the 19th century, and they are here to stay. What's new on the scene is competition to provide utility services that heretofore have been provided by monopolies in the private sector, such as the major investor-owned utilities overseen by the California Public Utilities Commission, or by monopolies in the public sector, cities and municipal utility districts overseen by elected boards. Both Congress and the California Legislature have enacted laws that encourage, even mandate, competition between service providers. The questions raised in this bulletin highlight taxpayer concerns about government's involvement in that competition.

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