Here’s the Type of Monopoly That Everyday Americans Should Worry About

There has been huge buzz in the media after a federal judge ruled in August that Google violated antitrust laws and has become a monopoly. The company could be forced to sell one of its most popular tools.

The federal government recently proposed forcing Google to sell its Chrome web browser to deal with its supposed search engine monopoly. The state argues that the company’s dominance stems from contracts that “make it harder for rivals to compete.”

Yet, as the search engine giant’s woes are the focus of conversation, little attention is paid to monopolies in our own backyards that actually affect consumers. Electricity companies in many states enjoy a de facto monopoly over the industry, which means less competition and higher prices for everyday folk. Indeed, several states, such as Iowa and Wisconsin, have been trying to pass legislation that would enshrine these companies as monopolies indefinitely.

These are called Right of First Refusal (ROFR) laws, which grant incumbent utility companies the exclusive right to construct, own, and operate new transmission lines that connect to their existing infrastructure.

These laws bypass the competitive bidding process and empower established utility companies to win projects without having to compete with other developers. Those supporting ROFR laws might suggest that they ensure that the grid remains reliable. But, in reality, they only serve to stifle competition and innovation while creating monopolies. The result is that the everyday consumer does not have options when it comes to determining where they get their energy.

Let’s use a hypothetical example. Imagine that your state has an ROFR law where a new $500 million transmission line is needed to connect a farm to an urban area. Under this law, the incumbent utility that has already been supplying power would automatically get the right to build the project without having to compete with other companies.

This means that other organizations that could have completed the project for less money are excluded from the process. The established company estimates that the project would cost $600 million and is allowed to complete the construction. Guess who pays for the higher cost? That’s right, it’s you, the consumer, who will have to pay for it through higher monthly rates.

This only sounds like fun if you happen to be the incumbent utility company, doesn’t it?

Earlier this year, Wisconsin’s State Assembly approved an ROFR law.

Groups supporting the bill include multiple utilities, labor unions and local economic development organizations. One of the utilities lobbying for the bill is American Transmission Co., or ATC, which owns and operates much of Wisconsin’s transmission line system.

Those opposed to the bill include consumer advocacy groups, like AARP and the Citizens Utility Board of Wisconsin, as well as Clean Wisconsin and conservative groups such as Americans for Prosperity and the Wisconsin Institute for Law and Liberty.

After the bill passed the Assembly Thursday, Americans for Prosperity-Wisconsin State Director Megan Novak issued a statement critical of lawmakers, saying the Assembly “sided with utility companies over hardworking ratepayers like you and me.” She called it “crony capitalism,” a term used to describe businesses profiting from a close relationship to the government.

So far, the bill has not gone anywhere else, but in the new year, it is likely that state lawmakers will take up the matter again.

ROFR laws are antithetical to free market principles and would only place more of a burden on everyday Americans who are still feeling the sting of the nation’s economic woes. When there is no real competition, major corporations can essentially charge what they want for their services because they know they don’t have to worry about other corporations beating their prices and quality of service. Journalist Ezra Wyrick lays out the problems nicely:

Of course, the state government could simply impose price caps on these companies to keep the costs down, couldn’t they? Perhaps, but that does little to solve the problem. With competition, organizations are forced to figure out how to offer a quality service at a lower cost. This promotes innovations that could not only lead to a financial break for consumers, but also better service.

Unfortunately, there are far too many state lawmakers who are more than willing to sell out taxpayers to buddy up with their buddies in corporate America. Hopefully, more consumers will wake up to what is happening and lean on their state representatives to kill this type of legislation.