On Electricity, Or, Can A Public Option Work?

Over the next few weeks there will continue to be great hub and bub about the “public option.” If there is a public option in the health care reforms that are being considered, it will be the end of all medicine in America, we are told. Some are positing that nobody will be able to get care because doctors will not accept the payment levels of the public option, and some believe that it will no longer be possible for private insurers to stay in business because they will be unable to compete with an enterprise operated by the government.

In today’s story that theory is tested—and it’s done by looking back in history, to a time when another government-owned business paradigm was introduced to the market. And if you guessed that comparing the health care market to the market for electricity in the Pacific Northwest would be the test…well, slap yourself on the back, ‘cause you’re the winner.

The co-opt option?

To make the story work, let’s pretend that you are a consumer of electricity living in Seattle. So you purchase electricity from Seattle City Light, which is owned by the citizens of Seattle, and they purchase their power from both publicly-owned and private sources. Other consumers in the State, including yours truly, purchase power from private sources. (I’m a customer of Puget Sound Energy, which is a stockholder-owned operation.) Still others purchase from a variety of Public Utility Districts (PUDs).

(Fun Fact: Snohomish County PUD is famous for discovering those astonishing “Grandma Millie” phone calls while reviewing the Enron Tapes; in which it was proven that Enron’s energy traders habitually manipulated markets for their own gain.)

The generation side of the equation is also based on a mix of private and public sources. Seattle City Light owns two hydroelectric projects which provide roughly half of the City’s power. They also purchase from the spot market on occasion, and on occasion they sell surplus power to the market.

Puget Sound Energy also owns generation resources, and sells surplus power of its own into the market. Virtually everyone who sells power to retail customers in this region also purchases power from the Bonneville Power Administration (BPA). The US Army Corps of Engineers own and operate a series of 31 dams in the Columbia River basin; the BPA sells the hydroelectric power generated at those dams to both public and private utilities. (They also operate most of the region’s transmission and distribution resources.)

One of the stated goals of the organization is to provide power at cost, and consumers in Washington, Oregon, Idaho and Montana are today paying about 1/3 less than the national average and roughly 1/2 the cost of electricity in New England.

Insurance Competition = parallel parking?

So how is all this conversation about electricity relevant to health care? Some, like Georgia’s Congressman Phil Gingrey, believe that a public health insurance option means “turning the whole system over to the government to run like they do the DMV.”

But in this corner of the country, there are public options available for electricity consumers with private industry successfully operating alongside the public option. Further, the biggest recent shock to the system came from a private company that was caught manipulating the market for its own gain.

The presence of the public option has led to lower consumer costs compared to other regions of the country, suggesting that removing the profit motive from the business is indeed bringing benefit to consumers. And if you add customer satisfaction surveys to the overall picture, the “public option,” at least in the Pacific Northwest electricity market, equals happy customers who are saving significant amounts of money.

So the next time someone tells you a public option automatically equals The End Of The World…tell ‘em they should have a look at my power bill some time.