Can you hear me now? Verizon hurricane troubles underscore danger of deregulating power companies

by | Oct 19, 2018

Ten months before Hurricane Michael devastated the Florida Panhandle, knocking out power and cellular phone service, Florida-based energy companies and some consumer groups proposed deregulating the state’s big utility companies. The driving force behind the idea was to allow consumers to choose any energy provider they wanted, which backers say would inject competition into the market and result in cost-savings for consumers.

But the proposal never made it past Florida’s Constitution Review Commission, and Hurricane Michael has underscored why: competition spawned by deregulation sounds good on paper, but comes with other costs of its own. Verizon Wireless, which operates in the deregulated telecommunications industry, is struggling to restore cellular service to Bay County, Florida. The company says the hurricane destroyed a significant portion of its fiber optic and cell tower network in the region.

In theory, wireless services should be easier to restore than electricity, since wireless signals can be beamed to end users, while electricity must be delivered right to the doorstep of every home. But it’s been more than nine days since the storm made landfall, and many Verizon customers are still forced to use a portable cell tower parked at the Verizon store in Panama City just so they can make phone calls and use the internet. Customers aren’t happy, and neither is Governor Rick Scott. He delivered an ultimatum to Verizon earlier this week, while praising their chief competitor, AT&T for having its act together:

Here you have the tale of two companies: one that prepositioned adequate assets and staged repair crews in the region in anticipation of predictable service outages following Hurricane Michael, and one that failed to do so. Part of that reason is because state and local governments have little say or control in how AT&T and Verizon operate their businesses. The telecom industry has been largely deregulated, allowing consumers to choose their own providers and allowing companies to compete on price and services.

That’s not true when it comes to Florida’s energy utilities, including Gulf Power in Bay County. Florida’s Public Service Commission sets the rates that energy companies may charge, and consumers get their energy from whichever company owns the transmission lines connected to their house. If the industry were deregulated, consumers would choose their energy provider, and whichever company owned the transmission lines connected to the consumer’s house could charge the supplier to “rent” the powerlines to deliver the electricity.

Now imagine that same scenario after a hurricane knocks out power to a wide swath of Florida, as just happened with Hurricane Michael. If a consumer doesn’t have power at their home, which company is on the hook for fixing the problem? Michael knocked out power generation plants as well as utility poles and powerlines. Are the lights out because the lines are down or because the power plant is offline?

Other states have deregulated their utilities with mixed results, but even in states where it’s seemed to have “worked,” the definition of success isn’t necessarily lower prices for consumers. Pro-deregulation groups often seem satisfied that it didn’t become the next California (remember the brownouts?).

The bigger concern for a state like Florida is infrastructure repair and recovery after a major storm. Florida is far and away the number one target for hurricanes in the United States – more than twice as many hurricanes make landfall in the Sunshine State than anywhere else. That’s what makes deregulation of utilities a much trickier prospect than in other states.

And we have Verizon to thank for helping to remind us of this important point. Thanks Verizon. We may not be able to call people in the Panhandle on your network, but as for Verizon’s example of how not to handle storm recovery, we heard them loud and clear.

 

 

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