ISSUE #6: Universal service

The MPSC Staff Report discussion of universal service issues is woefully inadequate. Essentially, the plan argues nothing will be done to alter existing support programs or endanger existing emergency power supply programs or policies. In theory, this sounds reasonable since electricity "is a fundamental component of modern day living," 42  as the Staff Report argues. But the report ignores some of the problems posed by current universal service subsidies.

Policy makers should understand that the greatest universal service program is a fully competitive marketplace that offers consumers a myriad of service options at affordable prices. While no one would disagree that electricity is vital commodity central to the lives of every citizen, so too is food—yet policy makers have never demanded command-and-control regulations and mandates to deliver it to citizens at reasonable prices. Instead, they have relied on a vigorously competitive food and grocery sector to serve the needs of average Americans. When fears arose that some citizens were in need of assistance, targeted, means-tested programs (such as food stamps) were usually used to provide support. While such programs are far from perfect, at least they do not require the establishment of convoluted regulatory mechanisms and hidden subsidy schemes that saddle the industry with uncompetitive mandates which can make it much less efficient.

Yet, in many ways this is exactly what has happened in the utility sector with both telecommunications and electricity providers. Policy makers have come to view these private firms as vehicles through which certain social policies can be achieved. This is unfortunate since it has only made these industries less competitive and done little to actually insure that those individuals who are most in need of assistance receive it. Therefore, while there certainly is no constitutional right to receive cheap electricity, policy makers will still, nonetheless, be concerned about very low-income individuals who may have problems paying their bills. In such cases, instead of forcing more mandates and requirements on private providers—such as "carrier of last resort" requirements—legislators should look to devise targeted and strictly means-tested assistance programs for individuals below the poverty level.

Recommended Action #9: Do not impose any type of "carrier of last resort" requirements on any carriers.

Recommended Action #10: Any assistance that is deemed necessary should be targeted, means-tested and delivered through more pro-competitive voucher-like mechanisms that will not greatly distort market activity.