Wednesday, November 14, 2012

The Long Island Power Authority as a Complacent Government Monopolist

Competition is good. While it creates anxiety and it isn't cool, competition nudges us to raise our game.  If you don't believe me, then read this NY Times article about the monopolist LIPA's lack of preparation for Hurricane Sandy.

Here is a quote from the article.

"In many ways, the Long Island Power Authority, known as LIPA, reflects the shortcomings of the state’s quasi-independent public authorities, which are often criticized as a shadow government that resists scrutiny. Long Island is the only region of New York where the main electrical utility is run by the government."

While the word "monopolist" isn't used in the article, it is clear that LIPA offers high pay/low work jobs for public employees who work for it. There is no market pressure and no incentive to  engage in costly effort such as trimming trees to reduce power outage risk.

"The examination by The Times shows that the Long Island Power Authority has repeatedly failed to plan for extreme weather, despite extensive warnings by government investigators and outside monitors. In fact, before Hurricane Sandy, the authority was significantly behind on perhaps the most basic step to prepare for storms — trimming trees that can bring down power lines.
Customers have been exasperated not only by a lack of power, but also by the authority’s inability to communicate basic information. Long Islanders have recounted tales of phones unanswered at authority offices, of wildly inaccurate service maps and of broken promises to dispatch repair crews."
Starbucks doesn't make these mistakes because it faces competition. It would lose all of its customers if it acted in a similarly complacent way.  All hail competition!