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Sunday, August 31, 2008
Lori Conway: Case study for botched deregulation
Meet Lori Conway, a so-called "energy hopper." A Texan, Conway owes Ambit Energy at least $2,600. Instead of paying the bill, she's switched to another electricity provider, leaving Ambit with no recourse but to take her to court to recover the money she owes.
Apparently, this kind of thing happens all the time, leaving responsible customers to make up the difference.
So how does it happen? If you ran a utility company, would you provide services to Conway, knowing how much she already owes? Or, at least, wouldn't you want a big deposit from her first before turning on the juice?
Well, here's the problem: In Texas, you wouldn't have any way of knowing that Conway owed at least two grand to other electricity providers.
Dave Lieber at the Star-Telegram writes:
"Electricity providers are hampered by state rules that prohibit the creation of a statewide database showing customers’ payment histories. If there were one, providers could see which customers are big risks.
...
Despite pleas from some providers, the state has not created a rule allowing a statewide database because of concern that it could place anunfair burden on some customers, especially lower-income households."
Oh.
So the Texas legislature is preventing electricity providers from sharing information with each other, the kind of information that -- in a truly free market -- would allow these companies to decide on a rational basis who they would or would not provide energy to, and how much of a deposit they would charge to bear the risk of doing so.
But there's more:
"Under Texas law, no one can be denied electricity service because of credit or payment history. Providers also cannot charge different rates to customers based on their financial worthiness."
You have to feel bad for the responsible customers who pay their bills on time. They end up paying more because people like Lori Conway feel like getting electricity for free.
Posted by Terrence Watson on August 31, 2008 | Permalink
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Comments
Lori Conway is a fraud artist and should be charged as such. There's still no good reason for shared data bases. Think of the right to privacy that everyone will lose, because of a bad apple or two? Its not worth it.
There! Now lets have all the socialists and big government folks tell me why I'm wrong. :)
Posted by: JC | 2008-08-31 4:17:36 PM
Well, here's the problem: In Texas, you wouldn't have any way of knowing that Conway owed at least two grand to other electricity providers.
Posted by Terrence Watson on August 31, 2008
Honestly, other than people that live there who really gives a shit what goes on with Texas utility companies. Is the Western Standard now the Western US Standard?
Posted by: The Stig | 2008-08-31 5:21:29 PM
JC,
I've been thinking about your point, and there's probably something to it. Customers would lose some privacy if utility companies were allowed to share information.
But is that really the kind of privacy anyone is entitled to have, as a matter of law? If I rip off company X, it should be able to tell company Y about that.
Suppose X and Y are grocers that allow people to buy goods on credit. Someone like Ms. Conway runs up a huge bill at X, then goes to Y looking for more. If X gives Y a heads up, Ms. Conway loses some privacy, but is that really a problem?
If we forbid X from sharing information with Y, isn't that a violation of freedom of expression, plain and simple?
(Corporate espionage is a different case, which can be handled by requiring employees to sign non-disclosure agreements and the like.)
Anyway, no utility company would be required to participate in the hypothetical database. Perhaps some could even use that as a selling point: you get electricity, no questions asked, but you have to pay a higher deposit for the privilege.
How does that sound to you?
Best,
Terrence
Posted by: Terrence Watson | 2008-08-31 5:31:33 PM
Canadian phone companies always seemed to know if someone owed money to one of their competitors. Maybe the utility companies need to provide lists of deadbeats as a courtesy to their competitors.
Posted by: dp | 2008-08-31 5:34:40 PM
Stig,
"Is the Western Standard now the Western US Standard?"
Eh, I thought someone might say something like this. Here's my response:
Libertarians are generally fans of deregulation. They get slammed when people on the other side provide anecdotes of poor consumers who get exploited by evil service providers. This is a counter-anecdote, I guess.
I'm sure I could dig up something similar in Ontario or any other place that has tried to deregulate (I did try, but there wasn't anything as concise as this story: if someone finds one, I'll update the post.)
But Conway's story illustrates a more general point, one Pierre Lemieux (you know, a Canadian) raised in his column last week: when government opens the door to private competition, it usually does so in a dishonest way that only hurts consumers (but is good for rent-seeking politicians who only want to get re-elected.)
That was my motivation for posting this particular story. It's a case study, like I said.
Best,
Terrence
Posted by: Terrence Watson | 2008-08-31 5:36:41 PM
Dp,
That sounds like a good idea, but I'm not sure the law in Texas allows it.
And it's not just a good idea for the companies, but for their customers. Unfortunately, we have no way of knowing how much more companies are charging their customers because of a) the need to make up lost revenue from those who skip out on their bills, and b) the need to offset the risk that customers will skip out, even if none of them do.
In essence, when companies are forbidden from sharing information in a case like this, they have to treat all their customers like potential deadbeats, and that's not good for anyone.
Terrence
Posted by: Terrence Watson | 2008-08-31 5:41:43 PM
How does that sound to you?
Best,
Terrence
Posted by: Terrence Watson | 31-Aug-08 5:31:33 PM
It sounds reasonable enough to me. There's two theories here (in my mind anyway). One is say when someone, a client, rips off my company, is it moral for me to tell one of my competitors about it? Considering I live in a community where (almost), everyone in my industry knows each other I would say yes, and in retrospect I would appreciate such a heads up.
That's one scenario.
On the other hand, we're all generally aware of the idea that there's just plain too much personal information out there on all of us. And I don't think we're really comfortable with that either. In this case where do we draw the line?
Its definately food for thought either way.
Posted by: JC | 2008-08-31 6:08:13 PM
I'm sure I could dig up something similar in Ontario or any other place that has tried to deregulate
Posted by: Terrence Watson | 31-Aug-08 5:36:41 PM
The UK water industry has been deregulated since 1989 and there are plenty of horror stories from both sides. The Australian electricity industry was deregulated almost 10 years ago and as in the UK there are lots of stories from both sides. You may not know it but the car insurance industry has access to your driving records in the government database. The main purpose was to stop people jumping to another insurer if they had had an accident or getting insurance if they had been banned from driving.
Posted by: The Stig | 2008-08-31 7:05:19 PM
I have to agree with JC. It seems odd though that a new customer would not be required to provide references from the previous utility company. I am sure that in Texas as just about everywhere, credit and reference checks would be allowed.
Posted by: Alain | 2008-08-31 7:42:10 PM
Like it or not, our countries are almost mirror images of each other. So stop the Liberal fantasy that what go on in the USA isn't of importance to Canadians. WS .... keep on posting these interesting bits from the USA. The adults are interested.
The larger point in this issue is that if the government takes it upon themselves to decree that no merchant force it's users to pay for their service then how long before no one will see the point in paying for anything,
It's about the value of goods and services and the providers right to collect their paychecks ...
It is government messing with the system of trade that has made the West wealthy and peaceful. It is based on trust. If you cannot trust your clients pay, you soon go into some other business, somewhere else. The users of services become instantly outraged if the service that they pay for is interrupted even for an hour.
Everyone should simply be forced to pay their own freight. The way it used to be. Anything else was known as stealing and there are penalties for that. I guess there are so many barriers now to charging thieves that it's just not worth it.
I don't like the idea that my service provider over charges me to cover the losses of those who refuse to pay. That is the road to socialism resulting in no one getting reliable service whether they are willing to pay or not.
Posted by: John V | 2008-08-31 11:00:57 PM
It is government messing with the system of trade that has made the West wealthy and peaceful.
Posted by: John V | 31-Aug-08 11:00:57 PM
Excuse me?
What made the West wealthy and Peaceful was respect for property, respect for hard work, respect for honesty, diligence, free enterprise, ethics and morality.
All things the government will have nothing to do with and couldn't find with a map and a flash light. These are all items that are completely foreign to our present day governments. And have basically disappeared under government influence.
"Everyone should simply be forced to pay their own freight. The way it used to be."
Forced, yes. In a court of Justice. Not with a socialist government policy.
Posted by: JC | 2008-08-31 11:29:07 PM
Hmm. Nowhere in the article does it say that an electrical company isn't free to cut the juice after two missed payments. Assuming that they are in fact free to do so, that seems like a better policy than charging some customers more than others. Eventually this woman will run out of electric companies and have to make candles out of ear wax.
Posted by: Shane Matthews | 2008-09-01 12:34:56 AM
JC wrote: "Forced, yes. In a court of Justice. Not with a socialist government policy."
So it's socialism if the government passes legislation, but not socialist if the courts enforce it?
Posted by: Shane Matthews | 2008-09-01 12:44:39 AM
Hmm. Nowhere in the article does it say that an electrical company isn't free to cut the juice after two missed payments. Assuming that they are in fact free to do so, that seems like a better policy than charging some customers more than others. Eventually this woman will run out of electric companies and have to make candles out of ear wax.
Posted by: Shane Matthews | 1-Sep-08 12:34:56 AM
Good point Shane.
And yes I see courts of "Justice" as opposed to Courts of "Law" as being a necessary authority. I do not see Government as being a "necessary" authority. The agenda from a proper court system is the administration of Justice. The agenda of a government is more power. The very thing I am most opposed to...more government power over you and me.
Posted by: JC | 2008-09-01 8:06:55 AM
Simple solution: report the information to the credit bureau. Rogers already does that.
Posted by: John | 2008-09-01 7:21:25 PM
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