The economic reply
State regulation of services
unnecessary, unworkable
1 *
standard
grocery
By MIKE PERRIN
The Texas Legislature is consid
ering a program of folly, which if
carried through, could lead to the
deprivation or cutback of vital ser
vices, including telephone, natural
gas, and electricity. The legislature
is considering a state utilities reg
ulatory commission.
Utilities have always received
special treatment in this country,
because of a much-touted theory of
cost curves.
The theory is the
more people
that are hooked
into a utilities
system, the less
it costs each
member of the
system; so that
is more efficient
to have one big
com pany doing
all the business
in town rather than have a
competitive setup, like
stores.
But those who proposed these
monopolies also saw that creating
“the only telephone company in
town” could lead to the company
acting like just that — the only one
in town, with resultant high rates
and poor service or some combina
tion of the two.
So these men decided that politi
cal bodies should “regulate” these
companies, that is, the companies
would have to accept a certain rate
for operation in return for having no
competition. In many areas, a single
commission was set up for the entire
state; in Texas, each city was to set
its own rates.
Texas is the only state without a
state regulatory commission; but
Texas does not have the highest util
ity rates in the country — far from it.
Some towns are higher than others,
as some are more successful in their
efforts at regulation than others.
But even this limited amount of
regulation indicates that the cost
structure for utilities is not unique;
that the cost per customer does not
in fact decline with each additional
hookup.
If a utility became rrtOte and more
efficient and therefore cheaper and
cheaper as it got more mid more
hookups, then we would not see
rate increases now. Even with all
other costs rising, the utilities
should be able to at least hold rates
steady by hooking up more and
more customers; but instead, even
as this goes to press, the federal
government is proposing rules that
states must allow automatic rate in
creases based on cost increases to
the utilities.
So either the costs do go up for
extra customers or else the utilities
are able to get rate increases politi
cally all over the country. If the
curves are like those of a normal
business, then the utilities should
be run like normal businesses —
free of restrictions, but also clear of
being granted a monopoly by law.
Or if the companies can get the in
creases politically without being
justified, then it is necessary to get
rid of the political process where
they get these rate increases.
Or in other words, regulation is
either unnecessary or unworkable.
Laws exist to keep people from
starting up competing utilities com
panies. If a company wanted to start
another electric company tomorrow
in Bryan, they couldn’t. The law
would not let them.
The mere existence of this law
proves that there is fear that some
one would like to start up a little
competition in this area.
There are three other reasons we
should be wary of a state regulatory
commission — the Supreme Court’s
recent utilities decision, political
tradeoffs, and desire by the utilities
for a commission.
The Supreme Court ruled over
the Christmas break that utilities
companies need not observe the
principles of due process when deal
ing with their customers; that is,
disconnections may be made with
out notice and for any cause. There
need not be second notices or any of
the other niceties of fair play.
That development means there is
no legal pressure on utilities to play
fair, regulated or not.
Political tradeoffs can occur — it
works like a bridge party; if you’re
not there, they talk about you.
Every area in Texas cannot be fully
represented on the commission.
Those areas which lack real rep
resentation will be the ones which
get the utility rate increases, be
cause board members are not going
to raise their home district’s rates.
This is the backroom kind of politics
which has no place in the legitimate
business world.
Coastal States Gas has already
publicly announced that they would
support a single state commission
instead of the 254 city councils now
in effect. The reason is and should
be obvious — expense and trouble.
At present, if a statewide rate in
crease is sought by Bell Telephone,
then they must deal with 254 city
councils — which means Bell most
convince more than 1,000 people
that an increase is necessary.
If you want to count in the costs of
bribery, direct and indirect, on a
majority or more than 500 people,
then you are talking about a lot of
money.
I am not suggesting that any of
this bribery actually occurs, I am
only saying that it could if one were
bent that way.
Now compare that 1,000-
person-problem with a 40- or
50-person-problem. Not only are
there fewer total people to deal
with, they also affect a larger area —
the largest state in the continental
U.S. The utilities’ job of pleading,
convincing, harassing, bribing and
threatening is made 25 times easier.
If the public sector can’t or won’t
regulate, then the private sector
must. How? Competition. If there
are three gas companies in town, all
three will treat you a lot nicer; any
rate increases must be held to the
bare minimum necessary to keep
from going out of business or cus
tomers will switch to someone else
with a lower rate.
Since there seems to be little evi
dence for special cost situations for
utilities, then competition would
work; it would work at least as well
as in the grocery stores or electronic
calculators. Your rights woidd be
guaranteed by competitive pres
sure; with this Supreme Court rul
ing, even state regulatory commis
sion can’t protect you.
The only logical answer is deregu
lation and demonopolization. I only
hope that the Legislature doesn’t
succumb to the temptation of creat
ing yet another political white
elephant and retirement home for
their relatives.
Correction
The Battalion regrets that an
error was made in Tuesday’s col
umn, Your Man at Batt. The Stu
dent Government Book Mart was
reported to purchase books for 40 to
50 per cent and sell them for 60 per
cent of retail.
The Book Mart buys books for 60
per cent and sells them for 65 per
cent of retail. (See related letter.
Listen up).
f Editorial )
Student pub
. . . I’ll drink to that . . .
The University of Texas opened a campus pub last
week. And the Rice University Board of Trustees is expected
to approve a campus pub Thursday; construction is scheduled
for February. The experiences of those schools show that it
takes three to four semesters—after a strong push from the
students—to open a pub. First top administrators need to be
convinced that the students should have a pub. Then the
board of directors needs to give permission. And there are
problems with proper licenses. Finally, there is money and
time spent for design and construction of the pub.
Basement Committee is building a coffeehouse in the
Memorial Student Center which would be a convenient place
to sell beer and wine. Cheryl Hall, chairman of the Basement
Committee, says she likes the idea. So the time and expense
for pub design and construction could be eliminated. The
problem now lies in convincing President Jack K. Williams
and the TAMU Board of Directors that the students should
have a pub.
The most compelling argument for any student service is
student demand. That’s why we have food services, dorm
rooms, laundry service, intramural programs, placement of
fices, counseling services, health services, professors and
classes.
But a pub raises prejudices which we can’t explain. It
has something to do with the idealism of higher education. It
has something to do with a moral prejudice against alcohol. It
has something to do with a fear of drunken Aggies on campus
during school nights. And it has something to do with the
image of Aggies as all-American, diligent, no-nonsense stu
dents (an image lacking at Rice and UT).
There is no substantial legal argument against a campus
pub. There would be no substantial financial argument
against it—if there was student demand. There seems to be
only prejudice. And right now it seems to be the prejudices
of Williams and the board.
Campus pubs are not worthy causes for political martyr
dom, and it is doubtful that Student Government, the MSC
Council or the Residence Hall Association will make a strong
push on this issue unless there is overwhelming student sup
port.
Page 2 THE BATTALION
WEDNESDAY, JANUARY 22, 1975
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Do students want a campus pub? We were planning to
print a questionnaire today. But the response would be ques
tionable following a pro pub editorial. So we will wait a week
or two for other arguments—con and pro—before we print
the questionnaire. Let us know what you think through “Lis
ten Up” and “Aggie Forum.”
Listen up
V.P. explains Book Mart
Dear Editor:
Once again in trying to serve the
students you may have done them a
disservice. In Tuesday’s Batt, Your
Man at Batt told us where we could
buy used text books. It discussed
the four retail stores in the area that
sell used books and, as an after
thought, the article mentioned the
Student Government-sponsored
Book Mart giving highly erroneous
information.
The real facts about the retail
stores:
(1) None of those stores will pay
more than 40 to 50 per cent of the
original retail price for books and
even less for most paperbacks.
(2) They all sell books back to stu
dents for 75 per cent of the original
retail price — a mark-up of 50 per
cent.
(3) For some strange reason, each
of those stores (including the Ex
change Store) price books the same
— did I hear someone say price fix
ing?
In an effort to serve the students
more directly in that area. Student
Government initiated the Book
Mart to purchase books from stu
dents for cash at 60 per cent of the
retail price — not 40 to 50 per cent
as was reported. The Book Mart
sells books back at 65 per cent of
retail, not 75 per cent like the other
retail stores. The student saves both
ways! The Book Mart is open from 9
a.m. to 4 p.m. each day on the sec
ond floor of the MSC.
I anxiously await the day that
serious and conscientious reporting
becomes the hallmark of the Batt,
for only then will the students and
other readers be served.
Curtis W. Marsh
V.P. for Finance,
Student Government
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.
Che Battalion
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The Battalion, a student newspaper at Texas A&M, is published in College
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