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<\/a>\r\n\r\n\r\nHouseholds getting electricity from Alabama Power Co. are using 6%\r\nless than five years ago. But their monthly power bills still have\r\nincreased by an average of 8%, partly because of a lucrative rate\r\nagreement that the utility brokered with state regulators 30 years\r\nago.\r\n<\/p>\r\n
\r\n“an absurd tax upon the rest of their fellow-citizens”\r\n
\r\n—Adam Smith\r\n<\/blockquote>\r\n\r\nThe deal allows Alabama Power, the state’s largest electric utility,\r\nto adjust its rates annually to maintain a return on equity, a\r\nmeasure of profit, of 13% to 14.5%. Now it is coming under fire from\r\nconsumer advocates and one state utility commissioner, who argue\r\nthat the utility’s profit levels are too high.\r\n<\/p>\r\n
\r\nSimilar disputes are breaking out across the U.S., as regulators\r\ntake a harder look at utility profits, given low interest rates that\r\nhave changed the cost of financing power plants. Regulators\r\ntypically set an upper limit on profits because utilities function\r\nas monopolies and regulators fear that they otherwise might gouge\r\ncaptive customers.\r\n<\/p>\r\n<\/blockquote>\r\n
\r\nShocked, shocked to hear monopolies might gouge customers!\r\nBut Adam Smith wouldn’t be shocked:\r\n<\/p>\r\n
\r\n\r\n“The interest of the dealers, however, in any particular branch of\r\ntrade or manufactures, is always in some respects different from,\r\nand even opposite to, that of the public. To widen the market and to\r\nnarrow the competition, is always the interest of the dealers. To\r\nwiden the market may frequently be agreeable enough to the interest\r\nof the public; but to narrow the competition must always be against\r\nit, and can serve only to enable the dealers, by raising their\r\nprofits above what they naturally would be, to levy, for their own\r\nbenefit, an absurd tax upon the rest of their fellow-citizens. The\r\nproposal of any new law or regulation of commerce which comes from\r\nthis order ought always to be listened to with great precaution, and\r\nought never to be adopted till after having been long and carefully\r\nexamined, not only with the most scrupulous, but with the most\r\nsuspicious attention. It comes from an order of men whose interest\r\nis never exactly the same with that of the public, who have\r\ngenerally an interest to deceive and even to oppress the public, and\r\nwho accordingly have, upon many occasions, both deceived and\r\noppressed it.”\r\n<\/p>\r\n—Adam Smith, Wealth of Nations, 1776\r\n<\/blockquote>\r\n