A consortium has offered to buy Puget Sound Energy (PSE) for $7.4 billion. Determining a price for PSE involved looking at assets and liabilities, ROI (return on investment), cash flow, future sales and profitability among other factors. A similar process would be involved in establishing a sales price for Seattle City Light. It's really a job for the accountants and mergers and acquisitions attorneys but for purposes of this discussion; let's use $3 billion. Let's also assume investment of sale proceeds could earn a return of five to ten percent per year on average or $150 to $300 million.
So what could we do with this money? One possibility, establish a trust fund dedicated to Seattle parks. With such an endowment, no need for the approximately $120 million annual operating cost for parks in the Seattle city budget. No need for the proposed $146 million extension to the property tax funded parks levy. There are other benefits. The utility would be free of city politics. Rate setting and oversight would move from the ill prepared City Council to the professional Washington State Utilities and Transportation Commission. As a private company, City Light would be more efficient and likely offer better service.
Yes, electric rates may raise slightly; private companies have to pay some taxes government owned ones do not, but on balance, a lower city budget, elimination of a property tax and stable funding for a first class parks system make the idea worth considering.
Posted by warrenpeterson at July 29, 2008 12:58 PM | Email ThisNot the same people...
Proof?
Posted by: demo kid on July 29, 2008 02:13 PMOn the other hand, Waste Management seems to do a bang-up job of collecting and disposing of garbage. Many cities have given up collection of trash and farmed out the utility to Waste Management.
Posted by: swatter on July 29, 2008 02:50 PMGee, remember a couple of months ago when the US Senate threw in the towel, after massive losses, and privatized their dining operation? The losses even became too painful for that pack of egomaniacs who so casually waste taxpayer dollars by the hundreds of billions.
Earth to Demo kid: wrong planet, pal......
Posted by: Hank on July 29, 2008 04:56 PMThere are only four ways money can be spent: 1) you can spend your own money on yourself; 2) you can spend your own money on someone else; 3) you can spend someone else's money on yourself; or 4) you can spend someone else's money on someone else.
What are the differences? When you spend your own money on yourself, you pay attention to both HOW much you spend and WHAT you buy -- it's your money and you benefit from the purchase. When you spend someone else's money on yourself you pay attention to WHAT you buy but NOT how much you spend because you still benefit from the purchase but it's not your money. When you spend your money on someone else, you pay attention to how much you spend, but not as much to what you're buying. When you spend someone else's money on someone else, you don't worry about what your buying or how much you spend.
Government spending is number 4: spending other people's money on other people. It's not always bad (in fact, it's often very necessary) but it's ALWAYS uniquely prone to inefficiency and waste.
Posted by: AD on July 29, 2008 05:13 PMEnough, of course, to know that the guy was a hack, who was only able to gain a following because of his skills in pedagogy and debate, and not the merit of his ideas. (Well, that, and the fact that his ideas made certain people a lot of money.) He pioneered the concept of looking at economies as mechanistic, easily defined systems, which is so far removed from the truth, it's not even funny.
And waste? You're assuming that private companies are free of waste, or charge prices that reflect "fair market value"? You've definitely got a lot to learn about how the real world works.
So... two questions for you, then:
What happens in this ideal economic system you describe when people don't have all the information they need to make decisions?
Where do public goods shake out in your ideal free market?
Posted by: demo kid on July 29, 2008 07:29 PMIt works; it's cheap. so let's leave it alone. I mean, let's insist City Light be efficient and free of politics. Not likely under Nickels. And keep it under city ownership.
Posted by: Ron Hebron on July 29, 2008 08:01 PMUm, if you live in the same world as I, you do know very well that our current situation is one in which people have ready access to TOO MUCH information and most problems stem from the inability or unwillingness to parse and analyze what everyone agrees is a SURPLUS of available facts and info.
"Where do public goods shake out in your ideal free market?"
I realize that public utilities are one of the few areas that for practical purposes you have to have a monopoly. The question is whether that utility is best managed by bureaucrats/politicians or private enterprise. It's a trade-off. Both politicians and bureaucrats are obviously self-interested. Both are prone to waste and mismanagement. My point is that politicians are UNIQUELY prone.
Posted by: AD on July 29, 2008 08:57 PMYou're missing the point, and inadvertently proving mine. If people aren't properly parsing the information that they have available, how exactly can they make the rational decisions that are required for efficient markets?
I realize that public utilities are one of the few areas that for practical purposes you have to have a monopoly. The question is whether that utility is best managed by bureaucrats/politicians or private enterprise. It's a trade-off. Both politicians and bureaucrats are obviously self-interested. Both are prone to waste and mismanagement. My point is that politicians are UNIQUELY prone.
But there's the difference... you can sack politicians, and use political pressure as a citizen to change publicly-owned utilities. Try doing that to private enterprise, especially without the backing of government. A truly free market in this case would not be to the benefit of people, only to the owners of a monopoly.
So talk of the theoretical advantages of privatization is great, but I often think that there's this faith that conservatives have in the free market that isn't always borne out from the evidence. As Shelley said, government is an evil that is only necessary due to the thoughtlessness and evil of men. And that is the biggest failing of many of Friedman's orthodox theories... he attempted to make economics a value-neutral deterministic science, when economics is by its very nature a chaotic science, subject to political and social dynamics. By focusing solely on the evil of government, you're missing the evil and thoughtlessness of men.
I'm not holding out hope that the government is the panacea for all woes, but blindly trading one for another isn't exactly a desirable thing.
Posted by: demo kid on July 29, 2008 09:34 PMAnd, no, I don't think rates would go up. Silly Light has been suffering from "strategic drift" for a couple of decades. They have forgotten that their purpose is to provide electricity and, instead, are doing Mayor Nipples bidding on every silly "green" concept they can come up with.
It's no secret Democrats and "environmentalists" are loving the current high gas prices. If they thought they could get away with it, Silly Light would double or triple rates.
A private company would likely lower rates. First, they would have government oversight and regulated, something the Silly Council doesn't do to Silly Light. Second, a private company would focus on the primary mission of producing and selling electricity. Finally, a private company would be 100 times more efficient because they would want to make a profit.
The sale of Silly Light is well past due.
Posted by: BananaLand on July 29, 2008 10:42 PMSeattle City Light has just such a complex history. Until the early 50s Seattle's electric power was provided by city owned damns and privately owned power sources. Seattle voted to buy out privately held Seattle Electric in 1951.
I can remember when I wrote checks to Seattle City Light and NOT to the City of Seattle. At one time City Light was it's own entity and power seemed cheaper and maintainence was more efficient.
Now your check to City Light goes into Seattle's general fund and they use it to buy riverlands and draw downs for salmon. I think a salmon is more treasured to City Light than a rate-payer.
Seattle City Light has often had contracts to buy private power where it was cheapest. Simple. Plus not long ago City Light owned part of the Centralia Coal Plant and we got cheap power there.
A big part of the Centralia plant's cheap power was that it used its OWN coal mine at the site.
Then along comes Puget Sound Air Quality and they convince City councilmembers like Margaret Pageler that coal smoke from the Centralia plant is keeping us from seeing Mount Rainier.
So Margaret and clan divested our interest in the coal plant. Then a canadian outfit named Trans-Alta bought the Centralia plant, cleaned it up and air quality DID go up.
Problem is we still buy power at jacked up prices from Centralia. But now it's imported coal and Seattle could have installed the scrubbers at the plant and kept our interest.
I saw the City Council meeting where Margaret learned that divesting Seattle from the Coal plant provided NO benefits. She was furious.
Seems the people in government will never learn that they need to seek experts from all sides of an issue before making the decision that is recommended to them by the single special interest of the moment.
So what's best? Public or private? I kind of a like an autonomous public utility with an elected supervisor.
Posted by: bart cannon on July 29, 2008 10:58 PMI can say for certain that I've read more Friedman than you. Enough, of course, to know that the guy was a hack
Tell you what. When you earn a Nobel prize in economics then maybe your words on economics will carry some weight...
Posted by: Shanghai Dan on July 30, 2008 07:32 AMOr so the philosophy goes.
Posted by: swatter on July 30, 2008 07:41 AMThere is no Nobel Prize in economics, first of all. Second, I find it laughable that you consider these awards a measure of infallibility! Do you feel the same about Amartya Sen?
Posted by: demo kid on July 30, 2008 08:07 AMThere is no Nobel Prize in economics, first of all
And now your ignorance is immortalized for all to see! For I give you:
You can see an entire list of all winners of this prize at the Nobel Prize website, if you're interested. Considering the Nobel Foundation lists them on their own page as Nobel Prize winners, I think any semantic game you might want to play was just blown out of the water...
You do realize the name you threw up, Sen, also received that very same prize (see his Wikipedia entry).
As far as Sen goes, I'll listen to him, and take his positions with great respect. Nobel prizes outside the Peace prize are really quite prestigious and worthy.
As far as you versus Friedman? Hands down, no contest... I'll take the one who actually earned the prize that the other claims doesn't exist.
Posted by: Shanghai Dan on July 30, 2008 08:30 AMYeah... umm... assmonkey is right. Minor little quibble, but the Peace and Economics prizes shouldn't be viewed in the same light as the others.
Besides, there have been a fair number of prize winners that, while brilliant, have presented models that have quite simply been wrong or ill-suited to practical use!
As far as Sen goes, I'll listen to him, and take his positions with great respect. Nobel prizes outside the Peace prize are really quite prestigious and worthy.
And you say all that, of course, but you pretty much disagree with what he says if you're a dyed-in-the-wool free market conservative! You know, you ARE free to disagree with the philosophy and ethics of Nobel Prize winners, you know, even if they are brilliant.
Posted by: demo kid on July 30, 2008 09:24 AMYou've been shown wrong right here in this very thread.
Posted by: Shanghai Dan on July 30, 2008 10:03 AMPfft. He's shown himself as being remarkably willing to pander to murderers to make corporations a lot of money from privatization.
And as far as "been proven right again and again", I beg to differ. Not drinking the conservative Kool-Aid? Yes. But spouting your talking points isn't "proof".
Posted by: demo kid on July 30, 2008 12:58 PMLOL, you've been proven wrong time after time and this is YOUR worthless answer. (murderers)
Tell us kid, how many safe jobs did Stalin/USSR create.
You truly are a KID!
And "safe jobs"? As far as I know, there are no "safe jobs" in a pure free market laissez faire system either...
Posted by: demo kid on July 30, 2008 03:12 PMSo you believe people have the information they need to make wise choices, but they aren't using it. I think I understand where you're coming from. People aren't smart enough to make good financial decisions, so it's best that those decisions are kept with the people who DO understand what's best - Ron Sims, Chris Gregoire and our friends in DC.
The market doesn't work because people are stupid. Government works because it's so smart!
Okay. Gotcha.
Personally, I'd rather be an idiot who's free to make poor choices than a genius who's forced to make the "right" ones.
Posted by: AD on July 30, 2008 04:10 PMMy argument is that there is no way that the idyllic free market envisioned by conservative economists will *ever* work, as economists have created completely unrealistic models. Models that rely on rational individuals making deterministic choices based on full information will NEVER truly be applicable, since people are not rational, do not make deterministic choices, and never have full information.
Does that mean that the government should make every decision for people? No. Does that mean that the government is infallible? No. However, to look upon government as a nuisance when it can provide a bulwark against the stupid decisions some people make, and the other people willing to exploit them? I'd rather take a social safety net than a ruthlessly Darwinistic economic system any day.
Posted by: demo kid on July 30, 2008 04:41 PMI'm just glad we got that cleared up. :)
Posted by: AD on July 30, 2008 11:53 PMthis from the the creators of 20-cent bag penalties, car-free-freedom-penalty days; bottle bans, trans fat ban kooks, no-campfire beaches, coddling rioters and bike terrorists, illegal alien sanctuary city, hate & nuke free zone, tolerating alleged council wife-slappers, public potty buffoons,lovers of whimpy police chiefs & ineffective handlers of punk mayhem, builders of drunkard bum apartments (the list goes on)...
...and they could sensibly manage a large utility with a sraight face? ha!
Posted by: jimmie-howya-doin on July 31, 2008 06:35 AMSo let me get this straight... utilities that are "critical to its citizens" should be audited, right? How exactly are you imagining that a utility managed by a corporation would work in that respect? How would they be held accountable?
Posted by: demo kid on July 31, 2008 09:18 AMFor starters, look to the east. Compare PSE's rate structure to SCL, and explain how much more affordable it is (here's a hint, because y'all seem kind of dumb: It's not cheaper. It's considerably more expensive. That's because they have INVESTORS that they have to pay dividends to, and executives who demand ridiculous salaries)
Then let's consider how stupid the concept of selling a public asset, that operates at a profit, to fund another public asset which generates no revenue. That's a remarkable amount of stupid. Are you sure your parents were siblings?
Still think it's a good idea? Go to the kitchen, get a fork, and stick into the nearest electrical outlet, while standing in a bucket of water, because you're too stupid to stay living.
Hmmm.. some might say that the government protecting idiots from their poor choices is a PRIME example of the safety net he's so in love with. Oh, but "idiot" and "poor choices" are judgmental pejoratives. Democrats call them "victims" and worship them.
Posted by: AD on July 31, 2008 05:59 PM