Local Energy Solutions and Broadband Parallels - Episode 629 of the Community Broadband Bits Podcast

In this first episode of the new year, Chris sits down with John Farrell, Co-Director of the Institute for Local Self-Reliance and Director of the Energy Democracy Initiative, to explore the intersections of telecommunications and energy policy.

They discuss the historical and ongoing impact of monopolies in these sectors, the challenges posed by regulatory frameworks, and how technological advancements like solar power and batteries are reshaping local power generation. Together, they unpack the parallels between broadband and electricity—touching on customer experiences, infrastructure investment, and the unintended consequences of scale.

This conversation dives deep into the incentives shaping utilities, the potential for community-driven solutions, and the urgency of adapting systems to modern challenges like climate change and peak demand. Tune in for a thought-provoking dialogue about breaking down barriers to innovation and building a more resilient, equitable future for energy and Internet access.

This show is 39 minutes long and can be played on this page or via Apple Podcasts or the tool of your choice using this feed.

Transcript below.

We want your feedback and suggestions for the show-please e-mail us or leave a comment below.

Listen to other episodes or view all episodes in our index. See other podcasts from the Institute for Local Self-Reliance.

Thanks to Arne Huseby for the music. The song is Warm Duck Shuffle and is licensed under a Creative Commons Attribution (3.0) license

Transcript

John Farrell (00:07):
There's this idea that bigger is better and what we found in the power sector is even as early as the 1970s, that idea of bigger is better was already breaking down.

Christopher Mitchell (00:19):
Welcome to another episode of the Community Broadband Bits podcast. I'm Christopher Mitchell at the Institute for Local Self-Reliance and [00:00:30] I'm in St. Paul, Minnesota talking to my boss, Co-Director of the Institute for Local Self-Reliance, John Farrell across the river. Welcome to the show. John.

John Farrell (00:40):
I'm not going to be able to match your enthusiasm, Chris, but I am happy to be here.

Christopher Mitchell (00:44):
Yeah, it's not the first time someone's told me they're not as enthusiastic as I am to be hanging out with me, so it's a common problem. What do you do, John? And what did you start doing? Just like hours before I started at the Institute for Local Self-Reliance.

John Farrell (00:59):
I [00:01:00] direct our Energy Democracy Initiative where we work on the problems of monopoly power and clean energy like community solar and rooftop solar. And I also, as you mentioned, I'm one of the Co-Executive Directors of ILSR.

Christopher Mitchell (01:13):
You started, I think, what, six months, nine months before me or something like that.

John Farrell (01:17):
It was a very short time that it was quiet in the office.

Christopher Mitchell (01:22):
That will not be a surprise to anyone. We wanted to talk today about the role of very large [00:01:30] companies and this is something I've been meaning to want to talk publicly with you about. We talk about this sometimes when I barge into your office on those rare days when we're both in the office nowadays, but I dunno, I feel like a lot of people don't appreciate the massive difference between a kind of like a for-profit community company, like a company that is for-profit, run by people at are normal people that live in the community versus a national publicly traded company. And since so much electricity [00:02:00] is delivered now to homes by these very large monopolies and companies, I want to talk a little bit about it and I thought we'd talk a little bit about electricity and telecommunications and talk about some of the things that are similar, but we might find some differences along the way as well. So with that, let me ask you to start. You work on energy issues, but what's been your real focus

John Farrell (02:23):
I guess before I do that, Chris, I just want to say, I think people are going to appreciate this because you might want to just start by asking [00:02:30] people what is a telecommunications company or a utility company that you have loved? And if you can name one that's big, I'll be impressed.

Christopher Mitchell (02:39):
Right? One that has a stadium named after it.

John Farrell (02:42):
There you go. Exactly right. It's kind of like the threshold is once it's got a stadium named after it, it's probably a shitty company. What have I been working on? The things that we focus on, I think it's important to understand that our approach to energy has always been from the perspective of how does a community capture more of its energy [00:03:00] dollars, keep more of them local, keep their economy more sustainable by focusing on maximizing where they can get their energy from local sources. So we've been at this for over 50 years modeling how energy flows in and out of communities, but I think the real big change honestly, and it's been during my time at ILSR, which is now nearing on 20 years, has just been the availability of solar photovoltaic technology. So the ability to put solar panels on any kind of building on any kind of structure and generate electricity [00:03:30] locally and the fact that that became orders of magnitude cheaper in the past 15 to 20 years to do has just fundamentally changed the nature of the electricity system. So this idea of local power generation has always been around and we talked about biomass and we talked about wind power and we even talked about ethanol is vehicle fuel over many decades at ILSR, but the advent of solar technology has really changed us to be focused on essentially how do communities [00:04:00] leverage inexpensive, put it anywhere solar technology to get more of their energy locally to store energy than in batteries and use it to push against the incumbent structures of our energy system that push us usually to purchase power through a large private company.

Christopher Mitchell (04:17):
I think it might be worth running back in time a little bit because I feel like electricity and telecommunications are joined at the hip if we ignore the Internet and focus on the early days of telephone and [00:04:30] that sort of a thing. They used to use the term ruinous competition and the idea that you have all these poles covered in wires and going everywhere, but there was a whole cultural moment which was we're going to have professionals do this sort of a thing and we're going to consolidate and we're going to have a single monopoly that will be regulated by the public. And so it will not be fleecing people, but it will often be privately owned and they'll have to do reports to a public [00:05:00] utility commission and that way we'll make sure that everyone gets the benefits and we don't pay too much and we have good technology and that sort of thing. That's sort of like the encapsulation of 1890 through 1930 or so. Is that right?

John Farrell (05:13):
Yeah, and it definitely certainly applies to the electricity sector. It was definitely how private companies, they essentially saw two problems. You had ruinous competition with each other to deliver services, but they also saw themselves in ruinous competition with the public because you had an increasing number [00:05:30] of cities and or states looking at doing publicly owned electricity delivery systems and the private companies wanted to insulate themselves from that. And so they were able to do so by lobbying legislatures to give them monopolies for service territories and to require them to submit to that public regulation. I assume the same is fairly similar with telecom, that you didn't want five sets of telephone wires running to every home.

Christopher Mitchell (05:56):
That's right. And we to take the profits from the urban areas [00:06:00] and use them to provide low cost service in the rural areas, and that all lasts until 1996, which coincidentally is around the time that we also decided to start getting rid of the monopolies on electricity. In some ways, and I think my audience is probably more familiar with how the 1996 Telecommunications Act basically says you cannot have a telecommunications monopoly granted by government. And so the federal government [00:06:30] has for the past 30 years focused on removing barriers to competition in theory and hoping that competition would spring forward. What's a quick recap of the monopoly? The end of monopoly flirtations that happened 30 years ago,

John Farrell (06:48):
So I don't think as complete in the electricity sector, although we could probably do some side-by-side comparisons. It would be interesting. So in about a third of states, states did what was called restructuring and [00:07:00] what they did is they made those big vertically integrated utility companies that owned everything from the power plants down to the meter on your house. They had to sell off the power plants. So power generation became competitive and then in some states as well, they also allowed for retail competition in selling electricity. Although the sort of innovation possible behind that is sort of odd because usually those retail sellers are all selling basically the same commodity product that they buy. So if you imagine it's kind of like competition [00:07:30] in grocery stores, yeah, it's somewhat meaningful, but they're all buying from the same place. In general, the power plant competition was much more robust and did significantly change the system, but again, it's only in a third of states, two thirds of states, you still have monopolies all the way up and down the food chain.

(07:47):
They own the power plant, they own the transmission lines, they own the poles and wires in your backyard, they own the meter and they sell you the power and they're publicly regulated. So it was an incomplete deregulation or restructuring in the [00:08:00] electricity business and ultimately no matter where you live, the last mile of poles and wires that delivers electricity to your home is still owned by a monopoly company. We didn't ever go to competition in terms of the actual infrastructure. It's just competition on the delivery over those wires, at least to a limited extent in some places.

Christopher Mitchell (08:23):
Now as we talk about wanting to get rid of Monopoly, to me intuitively as a person who hasn't done much in energy [00:08:30] policy for 18 years, I'll say it seems a little bit crazy to think about taking away the monopoly on the wires, the distribution system that actually connects my house. Would you be largely in agreement that we would generally want that to be a regulated monopoly?

John Farrell (08:47):
Yeah, I don't think anybody is seriously talking about cutting the cord, kind of getting rid of monopolies the way that cell phones obviously fundamentally transform telecommunications. We [00:09:00] are at a point where in some places where electricity is super expensive like California or Hawaii and electricity load can be relatively low. You're not trying to heat your home with electricity in the winter. You could conceivably put enough solar and batteries on your house to really be separate from the grid and not need that grid connection, but it doesn't really, it's not a great advantage. There are network benefits to staying connected and we still want people to stay connected, which is why having a monopoly over those poles and wires is important. There is an issue though, [00:09:30] which is that the monopoly companies have this incentive to always invest capital and to build infrastructure to solve any problem. And so what we do need to do is break that relationship, and I could talk more about it, but ultimately one set of wires to the house is all we need and that does have to be a monopoly that we regulate or have publicly owned.

Christopher Mitchell (09:49):
And that's where we are truly different because there are a small class of telecommunications companies that are still rate of return, which is to say, which is what I think [00:10:00] you'll explain in a second, but basically they get repaid based on all the expenses that they incur capital expenses, and they perhaps in telecommunications get some kind of subsidy on the operating side if needed. Also, these tend to be very small companies in very rural areas for telecommunications. Almost everyone else like Comcast at and t, they basically build their infrastructure with investor dollars. They're not rate of return anymore. But [00:10:30] tell us a little bit about what's happening with electricity then and why this is an issue.

John Farrell (10:34):
We use what's called cost plus regulation for 99.9% of electric utilities, and that just means they are in that monopoly territory in the area that they serve, designated by the state, whatever they spend, they get that cost back plus a rate of return and that rate of return is set by the public regulatory commission overseeing them,

Christopher Mitchell (10:58):
But they just want to build tons of stuff [00:11:00] then, John?

John Farrell (11:00):
Yeah, absolutely. I mean this is the term we use. The term we use is rate base in the electric industry and it's basically the sum of the value of all the assets. So if you add up the value of all the poles, the wires, the power plants, the meters, all that kind of stuff, the utility earns its rate of return on the un depreciated value on whatever's left in the value of every single asset every single year. So of course the more they build, the more money they make. And that is in fact the fundamental problem [00:11:30] here, and it's a problem in two ways. One is the incentive is to build build even if there are cheaper ways to provide the same thing. So the decades long problem has been, for example, it's much cheaper to provide more electricity by just using less electricity by encouraging people to put in LED light bulbs or to install efficient appliances and whatnot.

(11:52):
But utilities have to browbeat into doing that because it's against their financial interest. And then the second problem is that the rate of return that utilities earn [00:12:00] is in the ballpark of two times higher than it ought to be given the level of risk that they have. So a monopoly market is supposed to simulate a competitive market. It's supposed to say, okay, if you aren't in a competitive market and at the level of risk that you have, which is very, very low because a monopoly, what would be the rate of return that you might earn as a utility? Right now utilities are earning on average around 10% per year on that rate base for investments at which basically if they are approved by the [00:12:30] utility commission, they get their money back and it's kind of like investing in government securities or having an interest rate on your savings account. There's very, very small chance that that might pan out, but almost none. And yet utilities earn a really high return for that. I mean, I don't know of anybody who can earn a 10% return on basically zero risk outside of the utility sector. It's extraordinary. So we pay a lot more for electricity than we ought to because these utilities are at a very high rate of return.

Christopher Mitchell (12:56):
Well, we actually have a sense of what the market values almost zero [00:13:00] risk at because they're called federal treasuries and municipal bonds that have the full faith and credit of the cities that are issuing them that have AAA or top ranked bond ratings. Right, and that's typically in the sort of 3% area, maybe 4% when things are going bad, right?

John Farrell (13:18):
Yeah, exactly. So we have a very clear picture of what low risk looks like. There are pretty good accounting measures within the industry to come up with the correct number based on how much it costs the utility [00:13:30] to go out and get money from the market and the level of risk that it has. And all I can say is regulators routinely ignore the evidence and allow utilities to have these returns that are significantly inflated.

Christopher Mitchell (13:42):
And this is something that I really wanted to get at, and I don't want to dwell on it, but I want to make the point because some of the people that I respect and I'm happy to work with and call allies, I think that they would embrace something called rate regulation in telecommunications, which was tried [00:14:00] in the nineties with the cable and it was basically the federal government would start to basically say, we're going to require you to set low rates and we're going to look at your books and try to figure out what your real costs are and things like that, and what little I know about it from electricity does not give me a lot of hope that this can be done. Well,

John Farrell (14:19):
I mean if you're okay with overpaying investors significantly in order to have a system that's relatively stable and relatively affordable, I say that with [00:14:30] a big asterisk because of course millions of people are cut off from electricity service every year due to unpaid utility bills usually because they can't afford them and utilities have no incentive to help them make ends meet in order to get access. I mean, just imagine living without electricity in this economy, it's the basis of basically everything you do, it's your telecommunications, it's heating your cooling, your building, it's refrigerating your food. I mean

Christopher Mitchell (14:55):
It's your entertainment budget, like everything you're going to do everything.

John Farrell (14:57):
Yeah, everything. So I mean I think [00:15:00] the problem is, and people, this gets into the political side of things, these invest owned utility companies understand that their return is set by these public regulators and they see opportunities in our political system to help pick who those regulators are and invest heavily in that with the profits that they make. So they lobby that commission really hard to get at high rate of return. They contribute to the campaigns [00:15:30] of gubernatorial candidates who often select those commissioners. They invest in elections. Do they do that with their money or with our money? John? It depends on the states. Some states will actually bar utilities, and you can see this on a tool that we have called the Community Power Scorecard, but some states will actually borrow utilities from lobbying with money from customers. What they'll do is require that the utility have set it aside out of their profits that they've earned on that money. I mean, to be honest though, all [00:16:00] the money comes from us. Every dollar of utility profits, it's coming off utility bills. This is an accounting measure in theory, in a lot of places it will come from the utility investors, but in some states their utilities are allowed to recover those lobbying costs directly from customers. So they will bill you as a customer on your utility bill in order to go to the commission and say, pay us more money.

Christopher Mitchell (16:21):
One of the things that I think is worse for you in electricity is the fundamental mismatch between [00:16:30] the risk. I mean you already said it's very low risk, but even to the extent that they're deciding which facilities to purchase. And before we go there, I want to pause there for a second. Let's just talk for a second about if you're going to put new generation on the grid, John and I understand that having efficiency is going to be the lowest cost way to add capacity to the grid effectively, but if you're going to add new generation to the grid in 2025, [00:17:00] what is going to be your lowest cost in general, knowing there's some regional variation and things like that?

John Farrell (17:05):
Generally speaking, wind and solar electricity production is going to be your cheapest, and frankly, it can be the cheapest source whether you build it at very large scale or at very small scale. And this is where some of the interesting factors come in and who owns it matters a lot too. So I'll just give an example. A utility can build a really large solar array or a really large wind power project and produce electricity at that point [00:17:30] of generation very inexpensively. One of the problems we have today though is that all of the pipelines, all of the power lines that we use to bring electricity in from those places where we have space to build lots of wind turbines and solar panels, they're pretty full. And so utilities generally speaking also have to invest in new transmission lines in order, bring in power from those locations, and that adds to the cost

Christopher Mitchell (17:53):
Fantastically expensive. I mean, just for people that are interested in fiber optics, the cost of new high voltage transmission [00:18:00] lines is nothing you've ever seen before in terms of a fiber per mile cost.

John Farrell (18:05):
Yeah, I would actually be curious, but high voltage transmission line is like $3 million or more per mile. I don't know what's the comparison for fiber optics.

Christopher Mitchell (18:14):
If you can build fiber optics and the ideal conditions are like 20, $30,000 a mile, and then I would say up to in California where the average cost is a million dollars a mile, and that's considered to be crazy in most places. If you're in a hard to reach area in most of the United States, it's [00:18:30] maybe a hundred to $200,000 a mile that would be considered high cost.

John Farrell (18:34):
So transmission is super expensive. And then I'm sure you encounter this too, even with fiber optics, but building any kind of new infrastructure like that, you're trying to cross probably lots of public lands or environmentally sensitive areas, you got a lot of permits to pull. It usually takes a decade or more to build a new transmission line. So yes, it can be lowest cost to build that large scale clean energy, and in fact, among the large scale power production options, that will [00:19:00] still be your cheapest. But what it does is it shows that we also have an opportunity to build power at a smaller scale and for it to be very economical, you don't need that transmission, so you don't have the time delay for that, and you don't have the cost of building that transmission. So you can put solar on warehouses or over parking lots or even get people to put it on their homes.

(19:18):
And this is the other interesting thing about it then is that when you talk about smaller scale stuff, now you have a more diverse cast of people who can be owners. And the thing that's fascinating is that if a utility builds the large scale solar [00:19:30] and a transmission line, they're going to want to own it and they're going to want to put it in their rate base and then they're going to earn that extremely generous rate of return on it, which drives up the cost of that power for everybody. And that's a premium that's on any kind of power. It doesn't matter if it's from natural gas or nuclear or coal, whatever the utility builds and owns, they're going to charge that premium price. But if you can get someone else to build it for you, like me, I'm a customer in Minnesota and I put solar on my own house at my own expense. I'm adding electricity to this grid at a very low cost [00:20:00] because there's very little infrastructure that was required to be built in order to support that. And as a bonus, those solar panels are not in the rate base, so the utility's not earning an insane 10% return on it. Instead, here I am waiting for my 15 year payback on those solar panels.

Christopher Mitchell (20:15):
I had never heard of this before and thought about it in that way. I live in St. Paul. I have a home that has a lot of big trees around it and it's not a good candidate for solar, but I'm actually basically having [00:20:30] an infinitesimally but potentially noticeably lower rate for every person around me that's putting up solar rather than us having to procure new energy from things in which we'd have to pay excel to their 10% bonus, but also the fact that probably they're going to do it in a way that's going to be slightly higher cost because of the extra transmission and other things.

John Farrell (20:53):
Yeah, it's one of the things I think that people don't really appreciate because when you just look at the price to produce the electron, [00:21:00] like yeah, it is cheaper if you have a hundred thousand solar panels all in one place instead of 20 solar panels that you might have on a typical urban rooftop, but there are so much work that has to be done to get the electricity from those a hundred thousand panels to places where people use electricity that it often completely wipes out any economic advantage you have. And that also then gets us back to this question of scale is that there's this idea that bigger is better, and what we found in the power sector is even [00:21:30] as early as the 1970s, that idea of bigger is better was already breaking down. Utilities realized that they had reached the limits of economies of scale and new power plants and forever we regulated utilities as though we also understood that there were limits to scale and the size of a utility company. We repealed those federal regulations in 2005. Unfortunately, that had been set up right after the Great Depression in order to protect consumers. And we can talk about the implications of that, but I'm guessing that you have a similar impact [00:22:00] actually in the telecom sector. We kind of open to this by talking about the customer service experience of being served by a large company versus a small one. I think that's just one of many ways in which we see this notion of scale go backwards as things get too big.

Christopher Mitchell (22:17):
In part because, and actually this I think is relative for electricity too. We don't have a telecommunications company that is a top five or 10 company that just built out everywhere and they were like, we're [00:22:30] really good at building. We're going to build the same ever. We're going to have the same customer service, we're going to have the same backend software, we're going to use the same technology everywhere. No, what you have is a bunch of companies that are run by people that are better at financial stuff, mergers and acquisitions, and they bought other companies that had used different technologies, different backend softwares. And so one of the things that I'll often say is that Comcast I consider to be a fairly well managed company and charter I consider not to be a well-managed company. [00:23:00] I don't think we'll see Comcast able to significantly differentiate their customer service from that of charter because if you call them up, you're calling up a person who's looking at your address and then they're logging into a different system based on the historic company that had built your network and what software they had used and things like that.

(23:19):
There's not one software platform that these companies use because they are an amalgamation. They are a Frankenstein's monster of pieces of companies that they bought over the years and [00:23:30] then probably didn't put any money into to actually maintain or improve. It reminds me of the quadratic equation from eighth grade in math, like the parabola, it goes up for a while and you're getting benefits, and then you get too far out to the right and it goes down again and you're not getting benefits anymore. You just have the hassles of too many people, too many middle managers and all that crap.

John Farrell (23:50):
It's funny because I think about we intervene in regulatory proceedings about electric companies all the time, and we often see [00:24:00] that the letters DBA doing business As, and it's a reminder that anytime you take Xcel energy, which is a multi-state utility serving Minnesota, the Dakotas, Wisconsin, New Mexico, Colorado, in each of those regulatory proceedings in those states, it's the original company name. It's Northern States Power of Minnesota, or it's public service company of Colorado, and then it's doing business as Xcel Energy, but there's not really any, there's a corporate finance advantage [00:24:30] to making money for shareholders by having these agglomerations, but the utilities themselves are run in exactly the way they were before. In fact, the business structure and the business entities are exactly the same.

Christopher Mitchell (24:43):
I heard a rumor, and this is something that you could only do as a giant company. So AT&T I think has a contract for FirstNet, and I won't going to get into what this is, but FirstNet was this thing for a while and it's still going on. I guess where the federal government wanted to be able to make sure [00:25:00] first responders had telecommunications everywhere, and so I don't know if they picked at t and then went to Verizon and then back, but everyone screwed the pooch on it. It was just to get a horrible, difficult contract. But when at t, I think it needed state approval to do something, it hired all these people to go out and form great relationships with local folks in order to get the approval for this. And then as soon as they got it, they basically reassigned some of those people and fired the rest so that no one who had built those relationships could continue to intervene [00:25:30] and try to be involved. They specifically wanted to make sure that all of the people that they had made promises to would would've no way of coming back to try to make good on those promises.

John Farrell (25:40):
Unbelievable. I mean, we see unfortunately, a similar level of manipulation of the process among utility companies, and I think I talk about it sometimes as the economy. We talk about economies of scale in manufacturing or in production. I think about economies of lobbying that a lot of times these companies have joined up [00:26:00] and merged not because there's any demonstrable impact to consumers. In fact, you don't even have a consumer really that has a way to give you feedback. There's no competition. So you're not merging to offer a better product at a lower price. You're just merging because you've got a better offer that you can make to shareholders. An economy of lobbying in the sense that you learn what works in one state in front of regulators, and then you take it to another state and you use it in front of those regulators and you get that formula down and you can earn some pretty good profits

Christopher Mitchell (26:30):
[00:26:30] And you can afford to put together a team that has former legislators on it and top tier people who can get big paydays by working for that. Right. Okay. I wanted to touch on this earlier and I sort steered us there and then I steered us back away. But when an electric monopoly at this point wants to build a facility, this is the wild part for me, they're going to build a natural gas generation combined cycle plant, and they're going to do [00:27:00] that with our dollars. But also what's interesting to me is they're putting us on the hook for decades. Why is that and what have you been doing around that?

John Farrell (27:08):
There's like three things here that are worth talking about. One is that in some states, the utility puts up the money first to build the power plant. They get approval to do it, and then we pay them back after they build the power plant, except in a few crazy states, especially in the southeast where they pass some rules called construction work in progress, usually in order to support the financing [00:27:30] of nuclear power plants, which can't really be built otherwise to allow them to collect the money while they're building the power plan. But the problem is if they don't actually finish it, then everybody gets screwed. So there was a very big case of a nuclear power plant being built. I think Santi Cooper is what it was called down in the southeast billion, tens of billions of dollars invested in power. It ended

Christopher Mitchell (27:51):
Up being like

John Farrell (27:51):
$35 billion and it never produced a kilowatt hour.

Christopher Mitchell (27:56):
Just to give people a sense, the last, I believe I could be a little bit [00:28:00] dated the last time we built a nuclear powered aircraft carrier. This seems to carry, what, like 25,000 people? That sounds wrong, 2,500, 3000 people. They're large, massive things. It costs 10 billion to build a nuclear class aircraft carrier. So three and a half of those didn't produce, at least if that's the same plan, because I think it was $35 billion. Right? I mean it's

John Farrell (28:24):
Wild. 35 billion might be the one Vogel in Georgia, which did get completed.

Christopher Mitchell (28:29):
Okay, that's [00:28:30] what I was thinking of.

John Farrell (28:30):
To the great distress of all Georgia rate payers who are now paying a hundred dollars a year or a hundred, it's more than that. I mean, it's an absolutely astounding increase in the standard residential electric bill there. They'd probably much rather have a nuclear powered aircraft carrier in Georgia and just have it sitting there on the land doing nothing than have these power plants producing electricity that they're obligated to pay for. So anyway, sorry for the deviation there. So you have how it gets paid for, sometimes it's upfront, sometimes it's after it gets paid back, but [00:29:00] then you do have consumers are on the hook for paying back this utility investment with the profits that can be anywhere from 10 to 20 to even 40 years that the utility will get its cost recovery and continue to earn its profits. But the other crazy part about it is you're on the hook then as well for any kind of fossil fuel power plant for the fuel costs regardless of what happens.

(29:22):
So people will remember that winter storm that struck Texas a few years ago, Yuri, and it caused an extraordinary [00:29:30] increase in natural gas prices in a very short period of time because of really poor planning on the part of the natural gas distributors and the natural gas power plant owners in Texas who didn't insulate any of their equipment, even though the same damn thing happened 10 years before. And they decided to just roll with it. And in part because they knew that the rate payers were going to be on the hook for it. So when power prices and gas prices went through the roof, they just pass those through. There's a utility in Oklahoma, it's customers will pay, I think they'll pay $25 [00:30:00] a month for 25 years for one day's worth of gas purchases. It's incredible. I'm getting some part of that number wrong, but it is an incredible amount of time and an incredible amount of money that everybody's on the hook for decades because of that ability to shift risks onto consumers.

Christopher Mitchell (30:19):
And that's the part that I feel like drives me the most nuts as we're concluding here, is this idea that no matter what we see, we have the [00:30:30] incentives all wrong. And I guess one of the reasons that I wanted to do this, and we didn't plan this out if that's totally obvious, everything that I do is like this. So people are used to it on my show at least. But what's interesting to me is in some ways some people would view it as a progress if we could move Internet access to the regulation level that we have for electricity, and I feel like we're still in this situation in which having [00:31:00] public oversight sounds great, but time and again, we just see that the incentives are wrong and that it seems like no one who's in power cares enough to fix it.

John Farrell (31:09):
I think it's worth pointing out that a lot of us that work in the electricity sector, and I'll use net neutrality as a good example, we are envious of thinking about policy and the idea of principles for operation in terms of regulation rather than regulated monopoly companies. One of the things that we've learned unfortunately [00:31:30] is that not only do you have big utility companies that have incentives to build stuff in a certain way, and then they build these gas plants or these nuclear plants and customers get screwed by it and the utility gets off. But you also have this problem of inertia that large institutions, whether it's governments or companies, tend to just keep moving in the same direction without a lot of outside stimulus. And the thing is is that the technology change that has happened in the utility sector, and I [00:32:00] imagine in telecom too, right?

(32:02):
And there are going to be some good comparisons here, but the technology change that's happening in the utility sector right now, the availability of solar and batteries that can be put anywhere deployed by anybody. Utilities are not adapted to this. They're not really ready to seize this opportunity and figure out how to make the most of it to the benefit of consumers to lower costs, to lower risks for fuel, price fluctuations and spikes [00:32:30] to lower risks for climate change. I mean, there's so many ways that utilities could be seizing this opportunity, but they're not inclined to. I mean, why would they be? Their incentive regulation hasn't significantly changed and they're just used to doing something the same damn way over and over again and that they also are gatekeepers to these technologies being used by somebody else. I mean, this is one of the things that gave me gives, there's so much excitement about the lessons from telecom about cell phones and yet it's also disappointing. But the cell phone network was [00:33:00] a completely different system. It's almost as though you were building an entire second electric grid with that system that allowed you to do something completely novel. I don't know. How do you think of it given the way that telecom is developed, maybe there's some lessons there that we should be paying attention to in the electricity sector.

Christopher Mitchell (33:18):
The thing that I like about telecom, one of the many things is the way in which there's still an opportunity for experimentation and that's good and bad. One of the things that I would say came across my [00:33:30] mind as you were saying that was just every now and then I put my mind back into the 1980s, early 1980s, late 1970s, and the phone bill was a negligible part of anyone's budget. It worked all the time, all the time, all the time. And now we have a system that has almost limitless potential for innovation and it does all these things. And if I can't make a phone call, I'm not surprised. I don't make that many phone calls, but I'll bet that 10% [00:34:00] of my phone calls something goes wrong and I just redial it and then it works, and that's a price I'm willing to pay, but not for electricity.

(34:09):
It's sort of like I can't imagine if my lights started going off 1% of the time, I would be furious. And so there's reasons that we want to continue to be somewhat conservative with electricity, but it galls me the way we overpay for this and the way that I have to think, if you took an Excel [00:34:30] executive and said, look, would you put your life savings on the line and say that it is a smart investment now to commit yourself to 40 years of natural gas prices into the future? And I'd be very interested in how many of them would actually sign that contract. Five years, maybe I could believe that, but 40 years, 50 years. It's wild,

John Farrell (34:52):
Especially with recent history suggesting that one winter storm Yuri could blow your entire thing. I mean, I think that's the part that is [00:35:00] so disturbing about the way the system works is how we have allocated risk. So yes, we have very good reliability in the electric sector for the most part, or learning from climate change, unfortunately, that the kinds of things that we've planned for in terms of reliability are not encompassing the level of events that can happen. So I have a friend who recently had moved to Asheville, North Carolina as a climate refuge,

(35:25):
And then that hurricane came through and dropped 20 inches of rain and the power was out for weeks. [00:35:30] So you talk about 99% uptime being bad in the electric sector. Well, what about having it gone for 5% of your entire year and you have to basically relocate? If the world continued the way it normally was, we'd be relatively well prepared for it. But that's the thing I think that puts us in danger right now is that the system is not designed to innovate, but we need some innovation. What we have going on in California right now is just an atrocious example. Utilities do what they call public safety power shutoffs, [00:36:00] right?

(36:00):
Of all, very clever marketing name to basically say, I will stop giving you the service that you're entitled to. But they do this because they under invested in maintenance on their transmission system and it's vulnerable to wildfire risk when it's very windy. And so they basically just turn off the power in order to keep the entire system from going down and requiring repairs and whatnot. But now people have to plan for less reliability and power prices are super expensive in part because they have to socialize the cost of wildfires.

Christopher Mitchell (36:30):
[00:36:30] Lots of people are getting generators now like natural gas generators when, I mean, we have to draw this to a close in a second, but I feel like if you and I were having this conversation 15 years ago, we'd have to throw our hands up and be like, what are you going to do? Well, we know what we can do now. We can invest in batteries and solar rooftops.

John Farrell (36:47):
Exactly. Huge. I mean, the technology is there and a lot of wealthier people who have the resources to make those investments are doing it already, and they're spillover benefits because they're still connected to the grid. And those batteries [00:37:00] can then be used when they are connected to the grid to help meet peak energy demands. So it is really disturbing that we continue down this course of, there's a failure of imagination about how we could continue to maintain and even increase the system, electricity system's, reliability, and keep costs lower and deal with the impacts of climate change. But it's very difficult to do in a system where there's so much inertia and so much of the wrong incentives for these large utility companies.

Christopher Mitchell (37:27):
Yes, and we deal with so many of the same issues in terms [00:37:30] of peak pricing and things like that, that I feel like a lot of people can't always wrap their heads around in terms of how we price important parts of the network. We do have no time left. So I will say if people enjoyed this sort of just top of our head discussions of similarities and differences between telecom and electricity, you should let us know and we can dig a little deeper. But John, thank you so much for jumping in.

John Farrell (37:56):
Well, thanks for suggesting this, Chris. It was fun.

Ry Marcattilio (37:59):
We have transcripts [00:38:00] for this and other podcasts [email protected] slash broadbandbits. Email [email protected] with your ideas For the show, follow Chris on Blue Sky. His handle is at Sport Shot. Chris. Follow community nets.org stories on Blue Sky, the handles at communitynets. Subscribe to this and other podcasts from ILSR, including building Local Power, local Energy Rules, and the Composting for a community podcast. [00:38:30] You can access them anywhere you get your podcasts. You can catch the latest important research from all of our initiatives if you subscribe to our monthly [email protected]. While you're there, please take a moment to donate your support in any amount. Keeps us going. Thank you to Arnie Sby for the song Warm Duck Shuffle, licensed through Creative comments.

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