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Turn
out the lights on mayor’s plan to acquire LG&E
By:
Mr. George Dick
Mayor Jerry Abramson’s proposal that Metro Louisville purchase Louisville Gas &
Electric (LG&E) is seriously flawed. Such an acquisition would overstep the
purpose of city government and yield exactly the opposite of the results that
taxpayers and energy consumers desire.
Abramson claims the purchase would fill Louisville’s coffers with additional
revenues while keeping 1,800 LG&E jobs from leaving the city. The mayor says he
wants to prevent a situation similar to what happened when Brown & Williamson
announced it was moving its headquarters along with many high-paying jobs out of
Louisville last year.
Offering tax dollars to save private sector jobs is unsound policy. We need
government to provide services that private businesses cannot – such as police
protection, courts and roads. Free enterprise can provide everything else.
What evidence has been offered that a majority of LG&E’s 1,800 jobs would leave
Louisville if the company were sold? The utility’s past two out-of-town owners –
including current owner E.ON, a German-based firm – have not moved the jobs.
Somebody has to stay behind to run the company, don’t they?
Even if some jobs were moved, a government purchase still is not justified. In a
free-market economy, jobs are continually lost and created as technologies
change and consumer desires shift. This dynamism is the engine of economic
growth that fuels America’s prosperity.
California’s rolling blackouts of 2001 should serve as ample warning against the
dangers of government interference. Billions of taxpayer dollars were lost due
to wildly fluctuating wholesale prices that cannot be controlled by utilities.
Energy trading is risky business, which is precisely why ownership of LG&E
should remain in private hands. Privately owned companies adapt more quickly
than government to unforeseen changes and would bear the associated costs.
Abramson’s legal counsel contends that taxpayers can be shielded from risk. Yet
it is probable that the city will be required to guarantee the municipal bonds
to keep interest rates low.
In the event of financial trouble, Louisvillians will be left holding the bag
like the co-signor of a defaulted car loan. Many utilities have already landed
in bankruptcy court. And most are managed by professional business executives,
not career politicians with little or no business experience.
Should this occur in Metro Louisville, taxpayers will have no choice but to live
with whatever rate hikes or tax increases the mayor dishes out. Of course,
Abramson promises this won’t happen. But what other choice would he have?
As an investor-owned public utility, LG&E shareholders voluntarily assume the
financial risk associated with the huge capital expenditures needed to operate a
utility of this size. Bad investments fall on their shoulders.
Today, the Kentucky Public Service Commission protects LG&E consumers from
arbitrary rate increases. However, bad investments or mismanagement by a
Metro-owned LG&E could saddle taxpayers with an involuntary burden.
According to Kentucky law, if the city purchases LG&E, the KPSC will no longer
have control over the rates consumers are charged. No need to worry, says
Abramson, because the city will regulate itself – the political equivalent of
placing a fox in charge of the proverbial hen house.
For too long, Kentuckians have accepted the false notion that government has a
right or at least a good reason to provide services that the private sector can
also deliver. Yet the mayor and his advisers would be hard-pressed to name one
example of a government-owned enterprise that yields better results than a
privately owned or operated venture.
One need only consider the constant rate hikes and shoddy service of the U.S.
Postal Service, the questionable quality of education delivered by
government-owned schools and the widely despised and now-dismantled Vehicle
Emissions Testing (VET) program to see what we can expect from government
monopolies.
Regrettably, by proposing to municipalize LG&E, the mayor places his political
desires above our citizens’ best interests. Rather than expanding the role of
city government, he should look to outsource those services better provided by
the free market.
Such a policy would result in leaner government and lower taxes. It also
provides solid protection for current jobs and a better way of creating new
ones.
– George Dick is the director of the Center for High-Performance Government
for the
Bluegrass Institute,
Kentucky’s free-market think tank.
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