Georgia’s electric monopolies SEEM like the real illusion of choice

As much of the U.S. grapples with crippling summer heat, consumers are left to deal with the rising costs of cooling their homes. Sadly for Georgians, we have the second highest electric retail rates in the Southeast, but before you decide to shop around for a better deal, I have more disheartening news.

Despite all the bluster about Americans enjoying a market-based, capitalist economy, Georgians live under the rule of electric monopolies. Put simply, you only have one choice for an electric provider. If you think their prices are too high, products are underwhelming or their customer service is lackluster, then tough luck! That’s the illusion of choice facing Georgians, but policymakers should promote more competition and choices for Georgians.

While trust-busters have gone after other monopolies, they’ve largely ignored utilities like electric companies, in part, because they’ve been considered natural monopolies. “A natural monopoly arises when there are exceptionally large fixed costs to start the business and then the costs to produce additional goods and services continually decline as the business gets larger – the larger the business gets, the cheaper its costs of production become,” writes Forbes.

Given this notion, states gave hulking electric companies vertically integrated monopolies in which they controlled the generation, transmission and distribution of electricity. They can do so without facing competition, but this sweetheart deal comes with a caveat: the state regulates them more heavily than most other industries.

Other states have bucked this trend. More than a dozen have begun permitting legitimate competition, and unsurprisingly, that brought consumer rates down. Meanwhile for years, Georgia and other Southeastern states have remained entrenched and defiantly perpetuated the antiquated monopoly system.

Considering this outmoded model, it surprised some to learn in the past years that providers in 12 primarily southern states were banding together to create the Southeast Energy Exchange Market, also known as SEEM. At its core, it’s simply an automated system that lets monopolies buy excess power from each other more easily, which is important. Weather events can create the need for more, cheaper power than a single state can easily provide. While the monopolies already had the authority to buy from one another, it was done in a slow and cumbersome manner.

The Market was touted as addressing this issue, increasing competition and benefiting consumers and the environment. “The result will be cost savings and improved integration of all energy resources, including renewables, which are expanding rapidly in the Southeast. This will lead to a cleaner, greener, more robust electricity system,” according to Southern Company.

The Market, in reality, wasn’t the best choice, especially considering that there are better options available, like regional transmission organizations. They are largely nonprofits that “independently operate the transmission system on behalf of their members and are governed by boards that are independent of any market participants,” my colleagues Josiah Neeley and Devin Hartman wrote in 2020. “They are also independently monitored to prevent manipulation or abuse of market power abuses.”

This contrasts greatly with the Southeast Energy Exchange Market, which doesn’t benefit from the same independence or oversight. Rather, it keeps increased power in the monopolies’ hands and may be anti-competitive by unfairly barring third party providers from accessing the Market, like those that produce cleaner energy. What’s more, the supposed cost-savings are negligible at best.

Estimates suggest that the Market may save ratepayers $40-50 million across all participating states in the short-run. While this sounds considerable, it equates to about $1 in annual savings for residential customers. Had these states joined with a regional transmission organization instead, then ratepayers would save many times that amount and emissions would have been further reduced.

The Federal Energy Regulatory Commission originally seemed skeptical of the Market. In fact, it went into effect following a deadlocked approval vote from the regulating agency, which may have been a portent of future troubles. While the Market was better than nothing, it wasn’t a smart decision, but there may be an opportunity to improve it or even go in another direction.

Earlier this July, a federal circuit court struck the Market down for violating federal regulations requiring open access to the marketplace. It remains to be seen how the region’s monopoly electric providers will proceed. Increased competition is the gold standard for consumers. While it is unlikely that the electric utilities will relinquish their monopolies anytime soon, they could at the very least join with regional transmission organizations to better serve their customers.

Until that day comes, southerners may be stuck grumbling about hot summers, high electric prices and the illusion of choice.